MARKETING OF SERVICES

LESSON 3:
CLASSIFICATION OF SERVICES

The Objective of this Lesson is to have Profit Orientation

an insight into The overall business orientation is a recognized means of
• Classification of services classification:
• Development of service marketing • Not-for-profit: The Scouts Association, charities, public
sector leisure facilities.
• Examples of service sectors
• Commercial: banks, airlines, tour operators, hotel and
• Importance of service sectors
catering services.
• Factors contributing to growth
The Development of Services Marketing
• Challenges faced by service sectors
Firms which produce and manufacture physical goods were
• Difference between goods and services. involved in market-ing long before service providers embraced
Classification of Services marketing and developed specific marketing activities. Many of
As has already been suggested, there are a number of ways of the developments in services marketing are fairly recent. There
classifying service activity, and there is inevitably some degree of are a number of factors affecting developments within services
overlap between the methods available. This section outlines marketing:
some of the methods of classification commonly used. Organisation size and structure
End-user Regulatory bodies
Services can be classified into the following categories: Growth in service industries
• Consumer: leisure, hairdressing, personal finance, package Characteristics of services
holidays. Customer/employee interaction
• Business to business: advertising agencies, printing,
Service quality
accountancy, consultancy. .
Specific service sectors
• Industrial: plant maintenance and repair, work wear and
hygiene, installation, project management. Organisation Size and Structure
Many service providers are typically small and specialized -
Service Tangibility plumbers, lawyers and accountants are representative of the
The degree of tangibility of a service can be used to classify traditional service provider. In the past, they catered exclusively
services: for the existing local demand. Marketing specialists were not
• Highly tangible: car rental, vending machines, employed due to the size of the operations, which may have
telecommunications. been sole trader or partnership based, and due to limited
• Service linked to tangible goods: domestic appliance repair, competition, especially on a local scale.
car service. Regulatory Bodies
• Highly intangible: psychotherapy, consultancy, legal services. Regulatory bodies have also restricted the activities of many
People-based Services service providers. Restrictions still exist today on the amount
Services can be broken down into labour-intensive (people- and type of advertising which can be undertaken by certain
based) and equipment-based services. This can also be professional services, particularly in the medical and legal fields
represented by the degree of contact: (although these have been relaxed in the UK and the USA).
Public sector services and charities are also frequently constrained
• People-based services - high contact: education, dental care,
in their ‘business’ activities by various forms of legislation and
restaurants, medical services.
regulations.
• .Equipment-based -low contact automatic car wash,
Growth in Service Industries
launderette, vending machine, cinema.
However, growth in major services industries such as banking,
Expertise hotel and catering and tourism services has been accompanied
The expertise and skills of the service provider can be broken by new developments in marketing. Services marketing ideas
down into the following categories: and techniques have grown alongside the growth of the service
• Professional: medical services, legal services, accountancy, economy. Marketing has contributed to the growth and success
tutoring. of service industries in a number of ways. The design of the
• Non-professional: babysitting, care taking, casual labour. service product, or offering, has shifted from a product-based
focus to a customer focus - the organisation provides what the

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marlset needs! not what the organisation thinks the market
wants.
Characteristics of Services
The characteristics of services “‘intangibility, inseparability,
heterogeneity and Perishability - mean that there are new
considerations facing services marketers. These differences led to
the development of the expanded marketing mix to focus on
issues perceived by customers to be important in services
marketing.
Customer/employee Interaction
The customer/employee interaction takes on a far more
significant role in services marketing than in the marketing of
physical goods. Consequently, services marketing attaches more
emphasis to training and better communica-tions. Relatively
new concepts have emerged to support services marketing such
as internal marketing and relationship’ marketing. These are
now finding increas-ing acceptance in mainstream marketing
and are being applied to areas outside service.
Service Quality
Services marketing also places a clear focus on service quality and
programmes for implementing service quality. The develop-
ment of a clearer understanding of perceived service quality and
the customer’s perception of quality based on the total service
experience has addressed specific quality issues in services
marketing.
Specific Service Sectors
Specific areas of services marketing have attractedihterest,
especially not-for -profit organisations and professional services.
Marketers in these organisations are faced with ethical consider-
ations and other constraints. Certain public sector services are
similarly constrained. The adoption of marketing by these or-
ganisations, and the growth or marketing expertise in the area,
is leading to a greater marketing orientation.
Technological Developments in Services
Marketing
Perhaps the biggest impact of new technology in services
marketing is the move away from traditionally people-based
service to a higher degree of automation. Automated teller
machines - the banks’ hole-in-the-wall cash dispensers - are a
familiar sight on high streets everywhere. Automatic car washes,
computerized self-serve ticket reservation machines, even
remote banking services where all transactions are done by
telephone are all gaining wide acceptance amongst consumers.
Even one-to-one training programmes can now be delivered via
interactive video technology.
Technological advances in home equipment has led to a
demand for new services. The widespread ownership pf VCRs
(video cassette recorders) has led to flourishing video film rental
businesses. Cable TV network and satellite TV receivers are
growing in popularity, opening up new areas of business for
installation contractors. Today’s motor cars, with ‘on board
computers’, need greater technical expertise for maintenance,
which, in turn, leads to greater demand for training.
Technological developments have also had an impact on the
services market-ing management task. Information technology,
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electronic funds transfer and the use of databases have revolu-
MARKETING OF SERVICES
tionized services marketing management. In fact, most
marketing-linked technological developments have a role to play
in ser-vices marketing management. Many new technological
developments have been developed specifically around services
as discussed previously, such as cash dispensers. Many restau-
rants and fast food outlets use computerized till systems, where
the order is keyed in to the till, or even a hand-held key pad, and
relayed directly to the kitchen while the bill is being produced.
It is not only consumer services which have been revolutionized
by new technology. Industrial services are also utilizing new
technology. Remote diag-nostics using the telephone modem
facility allow computer service technicians to carry out software
adjustments and upgrades from base, even if the customer is
located overseas. Libraries and universities can utilize computer
databases from anywhere in the world via computer modem
links.
In general, it can be seen that new technology increases the
demand for services overall. This creates opportunities for
marketers in service organisations.
International Services Marketing
The UK economy depends on invisible exports for a substan-
tial proportion of revenue. Invisible exports have traditionally
included shipping, insurance and investment but now cover a
far wider range services. Service organisations are not only
involved in the business of exporting, but are increasingly
becoming international. Advertising agencies are an example of
a service industry becom-ing internationalized in response to
changes in the world market situation.
London is still one of the major bases for financial services
including commodities brokerage and insurance. City financial
services and expertise are invisible exports when the customer is
from outside the UK.
Exporting is considered to be a higher risk venture for service
organisations than for firms producing physical products. The
main reason for this is that services tend to be far more people
based. Production and consumption are inseparable, and the
service provider must, therefore, establish a base in the target
export market, with trained service personnel. It is not possible
to export a batch of the ‘product’ to be sold through distribu-
tors or agents as it is with physical goods. This means that the
level of initial investment, even for a very small overseas
operation, is relatively high.
Market entry methods closely mirror those for international
marketing of goods. Direct export is possible, as when a firm
of consulting engineers sends a.
member of staff to another country to carry out contract design
work. Joint ventures may be undertaken, with the service
provider forming a partnership with an organisation in the
target country to develop business. Franchising is also under-
taken, as evidenced by the worldwide growth of McDonalds
fast food restaurants. McDonalds use a combination of
franchising and setting up wholly owned subsidiaries on
various locations. Agents who act as employees of the service
provider can be appointed in export markets. ‘Color Me
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 Beautiful’, a personal image consultancy service, has consultants
MARKETING OF SERVICES

in many countries.
One of the main difficulties associated with international
services marketing is the question of cultural differences.
Cultural differences take on far greater significance in the high-
contact service encounter situation. Service delivery may have to
be adapted, and perceived service quality criteria examined from
the perspective of the target customers in different markets.

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 Tutorials

MARKETING OF SERVICES
• Discuss examples of service sectors.
• Explain the factors contributing to the growth of service
sectors
• Challenges faced by Service sector are many. Discuss.

Notes

Good-Service Continuum

~Pure Goods w/ Services ~Pure

50/50
Goods Services w/ Goods Services

Physical Product w/ Equal Know- Immediate

ledge consumption
product service mix based

Gasoline, Auto repair, Restaurants, Rental Medical

steel, computers. movie movies, care,
groceries. theater, software. consulting,
bookstores. day care.

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