26 Services Marketing

Kulbhushan Chandel

1. Learning Outcome

After completing this module, the students will be able to:

Describe the concept of services marketing.
Explain the services marketing management.
Explain various components of services marketing mix.
Suggest how to manage the service quality.

2. Introduction

Services are the centre of all economic activities in the society. There are numerous service industries which are presently working and this service sector is one of the fastest growing sectors. Various types of services are provided by various organisations, like government provides us services in the form of courts, police, military services, fire department, hospitals, employment exchanges and many more. Similarly private sector also provides us services such as airlines, hotels, insurance companies, entertainment sector and many more. In present world, it is very difficult to identify services from the goods as when a customer purchases a good service element is included in it. For example, a meal eaten at a restaurant is a combination of both goods, i.e. food eaten, and services, i.e. preparation of food, its delivery, etc.

2.1 Definitions of Services

“Services are any primary or complimentary activity that does not directly produce a physical product, that is, the non goods part of transaction between buyer and seller.”

– Service Industries Journal

“A service is an activity or benefit 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.”

– Kotler and Armstrong

3. Types of Services

Services are mainly classified into two broad categories, namely, professional services which are provided by qualified professional and non-professional services. Professional services are featured as advisory services which are generally provided by a professional person who is an independent person supervised by professional associations which provide them code of conduct and ethics according to which a professional has to work. These include services like financial advice, advertising, business and management consultancy, legal services, medical services and many more. Non-professional services are those which are either consumer oriented or business to business firms. Consumer oriented firms are those which are mainly focus on consumers such as entertainment companies and business to business firms are those which provide services such as office catering services, cleaning services, etc.

4. Characteristics of Services

The distinctive characteristics of services are as follows:

4.1 Intangibility: When a customer purchases a product, he can touch, see, smell and use it. But along with it something which is not seen but just felt, is also purchased by the customer along with it. That something is services. Services cannot be touched, seen, heard or smelt. Marketers develop diverse strategies for facilitating the communication of benefits of service developing a tangible representation of service and focusing on the service provider rather than on the service. Sometimes it is not possible for the service provider to advertise the service, then the service provider has to focus on the customers; like in case of life insurance the companies advertise the policies by developing a link in the mind of customers between their service and other tangible things that would create a positive association. The service provider has some distinguished skills and expertise that represent the service. Thus, the advertising generally focuses on the skill and technical competence of the service provider.

4.2 Variability: Services are heterogeneous. There can be variations in the services provided. The quality of service depends upon the service provider. Say, Taj Group of Hotels has good reputation. But their services could differ from one hotel to another due to different staff and their efficiency in providing that service. An actor, a singer might have expertise in one thing but they might not be efficient in any other one. High variability in services means the customer is facing greater uncertainty and risk in purchasing services. The service provider has to keep control over the quality of service provided. The higher the service variability, the lesser will be the loyalty of customers. Quality control can be improved by careful screening and training of the service personnel.

4.3 Inseparability: Services cannot be separated from the service provider. Unlike products which are first produced then sold and consumed; services are first sold then produced and consumed at the same time. The simultaneous production and consumption of services leads the service provider to provide services in the simple manner, services to be delivered close to the customer and the making of image of service provider in the eyes of the customer. As the services are produced and consumed at the same time, this helps the service provider to deliver services in a simple manner involving fewer intermediaries. Although services cannot be stored, but the service provider must provide the services at several locations.

4.4 Perishability: Most of the services cannot be stored for future sale, thus they are generally perishable in nature. If they are not consumed then they are generally wasted. Like if a theatre is not having all seats occupied then the seats left vacant in a show is the loss of revenue of the theatre owner. The service provider can try to overcome these problems of Perishability by matching the demand and supply of the services. This could be done by the service provider by not performing essential tasks during slack periods and performing them efficiently during peak periods.

4.5 Ownership: Generally, there is no transfer of ownership of services. The buyer does not become the owner of the anything like in case of product purchase, say, by purchasing a car the customer becomes the owner of it, but in case of services nothing happens like this.

5. Services Marketing Management

The application of management process to the service marketing firm is similar to the applicability of it to the product marketing firm. It comprises of following steps:

5.1 Organising Marketing Plan: Development of marketing strategy needs market analysis and market planning. While deciding service marketing plan, the service provider should first know about some things, such as type of service to be provided, who would be the customers, facing competition, taking competitive advantage of opportunities, knowing about the target market where the company would introduce its service. When the company knows about the above mentioned things, then it can develop market strategic plan for the services. Market information through market research is very important in organising market strategic plan. Through strategic planning, the company decided about its target which it has to obtain on the basis of marketing opportunities, threats and marketing situation.

5.2 Analysing Marketing Opportunities: While analysing the marketing opportunities, the decisions are taken such as identification of target market, determination of changing needs of the customers, taking advantage of opportunities and considering threats of the market. Specially, service marketers have to find out which is the target customer market where the company would introduce its service. For this the service provider has to consider the attributes of the customers. The marketing environment has to be considered. Internal environment, which is controllable, is the organisational structure and policies and decides about the manner in which the company responds to the customer. The external environment has to be considered carefully as it includes suppliers, distributors, competitors which have direct impact on the image of the company.

5.3 Selecting Target Market: The process of identification and evaluation of marketing opportunities is necessary in deciding about the target market. It involves the process of segmenting and targeting, and positioning.

5.3.1 Segmenting and targeting: As the services are heterogeneous in nature, due to this the service provider has to segment total market into small segments so that the whole target market could be divided into homogenous groups. On examination of numerous methods, the service organisations generally use the demographic variant as the most widely used method of segmenting the market. Age, sex and socio-economic analysis along with geographic location provide information for building up the profile of users of the service. This helps in targeting purposes in media planning, assistance in new service development, pricing policy and service delivery location.

5.3.2 Positioning: Positioning is concerned with the efforts of the firm in developing the clear image of the service to be delivered to the customer in the minds of the target customers. It recommends some problems for service marketers due to intangibility of services. The service provider has to position its service image in the mind of its customer like inn case of airline travel firm; it has to create a concrete image of its service in the mind of its customer.

5.4 Developing Marketing Mix Plan: The marketing mix of services is similar to the marketing mix of products. It also consists of service product, price, place, promotion, people, process and physical evidence. During the evaluation of the marketing opportunities, the service firm must select the target customers after segmenting the customers based on their homogenous needs. The firm must then position itself in relation with the competitors.

5.5 Managing The Marketing Effort: For the success of any marketing plan, the business firm has to make it so effective that it achieves the objectives of business. Finally the service firm mobilises the people and resources for implementation of plans and strategies. A systematic feedback is collected from the customers for the revaluation of the standards of the performance.

EXAMPLE: selling of managed services has a perfect example of software management service.

6. Service Marketing Mix

The marketing mix concept is for both product and services. For product the marketing mix has 4P’s, but in case of services additional 3P’s are there. Moreover, the 4P’s of marketing mix related to products requires some modifications when they are to be applied to the service marketing. The major challenges faced by the service marketer are the heterogeneity of services, needs and requirements of the customers, Perishability of services or absence of inventories, etc., necessitate the extension of marketing mix to include people, process and physical distribution in service marketing mix. The inseparability of services leads to the requirement of people in marketing mix. The Perishability of services leading to its non storage or no inventory makes the process of service marketing a critical one, so it match the flow of supply and demand process was needed to be included in service marketing mix. For making the intangible services appear tangible one there was a need of physical evidence in service marketing mix.

Example: McDonald’s, KFC, Pizzza Hut are perfect examples of homogeneity of services. The customer would experience same whether he is in India or in any other part of the world.

6.1 Elements of service marketing mix

The main elements of service marketing mix are as follows:

Product (Service Package)
Price
Promotion
Place
People
Process
Physical Evidence

6.1.1 Product (Service Package): Services are intangible products. Service Marketer has to keep in mind that the products are not purchased by the customers rather they purchase the attributes of the products which are converted into benefits. The main important aspect of service marketing is to consider the needs, benefits and satisfaction of the consumers of the services. For achieving success a service marketer has to match the consumers’ needs with the service delivered by the service provider. For this, following levels has to be analysed:

Customer Benefit: The services offered by the service provider must be in accordance with the customer benefit. The services must be changed according to the change in time and changes in the customer preferences.
Service Concept: The service concept basically means what services are being provided by the service provider. For example, a theatre owner provides entertainment services; it can include movies, drama, theatrical programs, music concerts and many more things. All these define the service concept.
Service Offer: The service offer includes all the types of services being offered by the service provider. When a service is offered, it includes both tangible and intangible elements. The service provider must control these. Like in the same example of a theatre, the service provider can provide comfortable seats, good music systems, etc.
Service Delivery System: The service delivery system is very important constituent of service marketing mix. This includes people and physical evidence part. Like if a customer goes to a bank, then the people would be the bank officials and physical evidence would be the bank building, counter, signatures, furniture, etc. These are tangible items of the service provided and have a huge impact on the services provided.

6.1.2 Price: In case of products, the price is used for every type of products like clothes, durables, etc. But in case of services, the price is different for different types of services. Like if the service provided is legal services then price is fee, in case of stock broker the price is commission, in case of education it is tuition fees, in case of insurance it is premium, in case of banking services it is interest and many more. The service provider has to be very careful while deciding the price of the services due to perishable nature of the services. The intangibility of the services is also significant for consideration in determination of prices. Like in case of lawyer, the price will depend upon the different cases and the expertise needed in it. Following types of pricing methods can be used:

Differential Pricing: In this different prices are charged from different customers. For example: in a theatre the price varies according to the rows in the theatre.
Discount Pricing: This type of pricing methods is used by the companies by offering discount to commission agents, brokers, dealers, etc., and even to customers this type of pricing method is used when the new service is introduced.
Diversionary Pricing: In this method a low price is charged first to attract customers by just offering lower price on basic services. And the additional services provided to the customer are charged at the normal price.
Guaranteed Pricing: In this method of pricing, a guaranteed price is charged from the customer on the results only. Like employment exchanges charge fee from a person only at that time when that person gets the job.
High Price Maintenance Pricing: This method of pricing is used by the doctors when the services differ according to the quality of service provided.

6.1.3 Promotion: The promotion of the services is a very vital part of service marketing mix. Promotion means to promote the service in the eyes of the customers. Promotion is considered to be beneficial only when the products to be sold are promoted as per the wants and desires of the customers not according to the seller. To have a successful promotion of the product, the service provider has to make a favourable positive image in the eyes of the customers about the attributes of the service provided. Advertising, publicity, personal selling and sales promotion any of these methods can be used for promoting the service according to the requirements of the service.

6.1.4 Place: In case of place or physical distribution, the major issue is about the location of the services so that maximum numbers of customers are covered. Channels of distribution of services are short i.e. from direct manufacturer to ultimate consumer. Although the distribution channel is short but still a large number of intermediaries are involved in it. For example: while establishing a university, schools, colleges, banks, hospitals, etc. the location is important point of consideration as its location will ultimately affect it in all manners. The service marketer has to consider the channels of distribution properly as the channels of distribution of products are different from that of services.

6.1.5 People: People, the human element is an important constituent of marketing mix. The people include both the service provider employees as well as the customers. The contact personnel of the service provider company are those personnel with whom the customers contact. The customers make the whole image of the company by talking and interacting with those personnel. Thus, the contact personnel needs to be polite, well-informed, well-behaved, courageous so that the customers get satisfied after talking with them and the customers get full required information from them. If the service provider firm cares about both the employees and the customers, then it could lead to increased motivation and to higher level of satisfaction which would ultimately brings loyalty to the company from both employees and customer’s behalf.

6.1.6 Process: The process element means the way in which the service is delivered to the customer. In includes two points; first the inseparability feature of the service. It includes the way in which the company’s personnel deliver the service and the way in which the customer participate in the service delivery process. The second point is auxiliary i.e. the added value of the service the way in which the service of the company is different from that of its competitors.

6.1.7 Physical Evidence: Physical Evidence means the environment in which the service is provided. As the services are intangible, the customer needs a tangible clue about the service which would enable them to evaluate the service. These physical evidences verify the existence of the service. These can be peripheral evidence which generally possessed as a part of purchase, like in case of opening a bank account, cheque book and pass book are physical evidences; and it can be essential evidences like in case of purchase of airline services the customer gets the service ticket as an essential evidence of the purchase of service.

7. Managing Service Quality

In service marketing the management of the quality of service is very important. The management of the service quality depends upon the customer’s perceived service with the expected service. Generally, if the perceived service falls within the limit of the expected service then the customer would continue to use that service. Otherwise, in case if the perceived service falls of the expected service level then the customer might opt for any other service provider. Thus, it is very essential for any service provider to make the service quality and to make necessary changes in the quality of the service according to the needs and the changes in the circumstances. Customer expectations are the beliefs about the service delivery which are used as the base on which the service quality is measured. The customer service is about the perception of the customers. Perception of one customer differs from that of the other one. Generally, the perception of one customer might be very good regarding a particular service but it might be totally opposite in regard to any other customer regarding the same service. The one service firm differs from any other firm on the basis of the service quality only. There could be following gaps in the service delivery:

Gap between customer expectation and management perceptions
Gap between management perceptions and service quality specifications
Gap between service quality specifications and service delivery
Gap between service delivery and external communications
Gap between expected quality and perceived quality.

The management of service quality would need the setting up of right standards according to which the service would be delivered to the customers, organising and implementation of the service quality process so that the process works in a systematic manner, and proper and regular monitoring of the process should be there so that the necessary changes can be made whenever needed.

8. Summary

Presently, service sector is dominating the economies of developed and developing nations. Services are the centre of all economic activities in the society. There are numerous service industries which are presently working like government provides us services in the form of courts, police, military services, fire department, hospitals, employment exchanges and many more. Similarly private sector also provides us services such as airlines, hotels, insurance companies, entertainment sector and many more. In present world, it is very difficult to identify services from the goods as when a customer purchases a good service element is included in it. In such a competitive world there is a need for the effective and efficient service marketing mix which could help the service provider company in surviving in this competitive world. The special features of the services has brought need of extended marketing mix which includes product, price, place, promotion and also people, process and physical evidence in it. As the services are perishable and intangible, they need to be tangible through the physical evidence. In this competitive world there is a dire need of the management of the service quality also so that the firm can take the competitive advantage also.

Suggested Readings (Books and Websites)

Ghosh PK, Sales Management- Text and Cases, Himalaya Publishing House, 2010.
Jobber David and Lancester Geoff, Selling and Sales Management, Pearson Education, Sixth Edition.
McCarthy, Jerome E. (1964). Basic Marketing. A Managerial Approach. Homewood, IL: Irwin.
Needham, Dave (1996). Business for Higher Awards. Oxford, England: Heinemann.
Kotler, Philip (2012). Marketing Management. Pearson Education. Kotler, P. and Keller, K. (2006), Marketing and Management, Pearson Prentice Hall, Upper Saddle River, NJ, USA
McCarthy, Jerome E. (1975)”Basic Marketing: A Managerial Approach,” fifth edition, Richard D. Irwin