PGPBM

SERVICES MARKETING
FOURTH SEMESTER
Q1. What are the characteristics of services?
Ans. Some of the important characteristics of services are as follows:
1. Perishability:
Service is highly perishable and time element has great significance in service marketing.
Service if not used in time is lost forever. Service cannot stored.
2. Fluctuating Demand:
Service demand has high degree of fluctuations. The changes in demand can be seasonal or by
weeks, days or even hours. Most of the services have peak demand in peak hours, normal
demand and low demand on off-period time.
3. Intangibility:
Unlike product, service cannot be touched or sensed, tested or felt before they are availed. A
service is an abstract phenomenon.
4. Inseparability:
Personal service cannot be separated from the individual and some personalized services are
created and consumed simultaneously.
For example hair cut is not possible without the presence of an individual. A doctor can only
treat when his patient is present.
5. Heterogeneity:
The features of service by a provider cannot be uniform or standardized. A Doctor can charge
much higher fee to a rich client and take much low from a poor patient.
6. Pricing of Services:
Pricing decision about services are influenced by perishability, fluctuation in demand and
inseparability. Quality of a service cannot be carefully standardized. Pricing of services is
dependent on demand and competition where variable pricing may be used.
7. Service quality is not statistically measurable:
It is defined in form of reliability, responsiveness, empathy and assurance all of which are in
control of employees direction interacting with customers. For service, customers satisfaction
and delight are very important. Employees directly interacting with customers are to be very
special and important. People include internal marketing, external marketing and interactive
marketing.

Q2. Briefly explain the concept of SERVQUAL model.

Ans. The SERVQUAL Model is an empiric model by Zeithaml, Parasuraman and Berry to
compare service quality performance with customer service quality needs.
It is used to do a gap analysis of an organization's service quality performance against the
service quality needs of its customers. That's why it's also called the GAP model.
Service quality is linked to the concept of perceptions and expectations. Customers evaluate
service quality by comparing what they expect with how a service provider actually performs.
Thus, service quality can be defined as the difference between customers' expectations of
service and their perception of actual service performance; formally the degree and direction of
discrepancy between customers' service perceptions and expectations. "Service quality is a
measure of how well the service level delivered matches customer expectations. Delivering
quality service means conforming to customers' expectations on a consistent basis". Customers'
perceptions of service quality result from a comparison of their before-service expectations
with their actual-service experience. The service will be considered excellent, if the perception
exceed expectations; it will be regarded as good or adequate, if only equals the perceptions;
the service will be classed as bad, poor or deficient, if it does not meet them. Based on this the
authors developed a scale for measuring service quality, which is mostly popular known as
SERVQUAL. This scale operationalizes service quality by calculating the difference between
expectations and perceptions, evaluating both in relation to 22 items that represent the 5
service quality dimensions knows as Tangibles, Reliability, Responsiveness, assurance and
Empathy.
SERVQUAL Gaps
Gap 1: Not Knowing What Customers Expect - gap 1 is the difference between customer
expectations of service and company particularly management, understanding of those
expectations. A number of factors have been shown to be responsible for gap 1. First, because
marketing research is a key vehicle for understanding consumer expectations and perception of
service, the size of gap 1 depends greatly on the amount of marketing research conducted. A
second factor is lack of upward communication. Frontline employees often know a great deal
about customers but management may not be in contact with frontline employees and may not
understand what they know. A third factor is a lack of company strategies to retain customers
and strengthen relationships with them. A finally, inadequate attention to service recovery -
understanding why people complain and what they expect when they complain and how to
develop effective strategies for dealing with inevitable service failures.
Gap 2: Not Selecting the Right Service Design and Standards - a recurring challenge in service
companies is the difficulty of translating customers' expectations into service quality
specifications. Thus, provider gap 2 reflects the difference between company understanding of
customer expectations and development of customer-driven service designs and standards. A
number of factors have been shown to be responsible for gap 2. First of all, inadequate
commitment to service quality; secondly a perception of unfeasibility, and finally, inadequate
task standardization and an absence of goal setting.
Gap 3: Not Delivering to Service Standards - is the difference between development of
customer-driven service standards and actual service performance by company employees.
Even when guidelines exist for performing services well and treating customers correctly, high
quality service performance is not a certainty. Standard must be backed by appropriate
resources (people, systems and technology) and also must be enforced to be effective - that is,
employees must be measured and compensated on the basis of performance along those
standards. Thus, even when standards accurately reflect customers' expectations, if the
company fails to provide support for them - standards do not good. Factors influencing gap 3
are: poor employee-job fit and poor technology fit, inappropriate supervisory control systems,
lack of teamwork and perceived control.
Gap 4: Not Matching Performance to Promises - advertising, sales force and other
communications set the standard against which customers assess a company's service quality.
Ensuring that all the company's external messages are aligned with what the company delivers
is more difficult in service because what is delivered critically depends on employees'
interactions with customers. This is also a result of inadequate horizontal communication and
propensity to over-promise.
Gap 5: Not Delivering the Service (perception) as being perceived - this is the only gap that can
be examined solely on the data from the customer; study of other gaps, while important, would
require data collection from companies themselves.

Q3. Discuss the 7Ps of services marketing.

Ans. The first four elements in the services marketing mix are the same as those in the
traditional marketing mix. However, given the unique nature of services, the implications of
these are slightly different in case of services.

Product: In case of services, the product is intangible, heterogeneous and perishable.

Moreover, its production and consumption are inseparable. Hence, there is scope for
customizing the offering as per customer requirements and the actual customer
encounter therefore assumes particular significance. However, too much customization
would compromise the standard delivery of the service and adversely affect its quality.
Hence particular care has to be taken in designing the service offering.
 Pricing: Pricing of services is tougher than pricing of goods. While the latter can be
priced easily by taking into account the raw material costs, in case of services attendant
costs - such as labor and overhead costs - also need to be factored in. Thus a restaurant
not only has to charge for the cost of the food served but also has to calculate a price for
the ambience provided. The final price for the service is then arrived at by including a
markup for an adequate profit margin.
Place: Since service delivery is concurrent with its production and cannot be stored or
transported, the location of the service product assumes importance. Service providers
have to give special thought to where the service would be provided. Thus, a fine dine
restaurant is better located in a busy, upscale market as against on the outskirts of a
city. Similarly, a holiday resort is better situated in the countryside away from the rush
and noise of a city.
Promotion: Since a service offering can be easily replicated promotion becomes crucial
in differentiating a service offering in the mind of the consumer. Thus, service providers
offering identical services such as airlines or banks and insurance companies invest
heavily in advertising their services. This is crucial in attracting customers in a segment
where the services providers have nearly identical offerings.
We now look at the 3 new elements of the services marketing mix - people, process and
physical evidence - which are unique to the marketing of services.

People: People are a defining factor in a service delivery process, since a service is
inseparable from the person providing it. Thus, a restaurant is known as much for its
food as for the service provided by its staff. The same is true of banks and department
stores. Consequently, customer service training for staff has become a top priority for
many organizations today.
Process: The process of service delivery is crucial since it ensures that the same standard
of service is repeatedly delivered to the customers. Therefore, most companies have a
service blue print which provides the details of the service delivery process, often going
down to even defining the service script and the greeting phrases to be used by the
service staff.
Physical Evidence: Since services are intangible in nature most service providers strive
to incorporate certain tangible elements into their offering to enhance customer
experience. Thus, there are hair salons that have well designed waiting areas often with
magazines and plush sofas for patrons to read and relax while they await their turn.
Similarly, restaurants invest heavily in their interior design and decorations to offer a
tangible and unique experience to their guests.
Q4. In what ways is distribution of services different from goods? Identify a service which can
be distributed through electronic channel and discuss the benefits.
Ans. The distribution function of marketing is comparable to the place component of the
marketing mix in that both center on getting the goods from the producer to the consumer. A
distribution channel in marketing refers to the path or route through which goods and services
travel to get from the place of production or manufacture to the final users. It has at its center
transportation and logistical considerations.

Business-to-business (B2B) distribution occurs between a producer and industrial users

of raw materials needed for the manufacture of finished products. For example, a
logging company needs a distribution system to connect it with the lumber
manufacturer who makes wood for buildings and furniture.
Business-to-customer (B2C) distribution occurs between the producer and the final user.
For instance, the lumber manufacturer sells lumber to the furniture maker, who then
makes the furniture and sells it to retail stores, who then sell it to the final customer.
SERVICE DISTRIBUTION:
Direct Delivery of Service-

Channels for services are often direct- from creator of the service directly to the
customer
Services cannot be owned, there are no titles or rights to most services that can passed
along a delivery channel
Inventories cannot exist, making warehousing a dispensable function
Delivery of Service through Intermediaries-

Intermediaries may co-produce service, fulfilling service principals promises to

customers. Eg.: Franchise Services
They make service locally available
Provide time and place convenience for the customers
Provide retailing function for customers because they represent multiple service
principals. Eg.: travel agents
Primary types of intermediaries Franchisees, Agents & Brokers, Electronic Channel
GOODS DISTRIBUTION:
Indirect Distribution-
Indirect distribution involves distributing your product by the use of an intermediary for
example a manufacturer selling to a wholesaler and then on to the retailer.
Direct Distribution-
Direct distribution involves distributing direct from the manufacturer to the consumer For
example Dell Computers providing directly to its target customers.
The advantage of direct distribution is that it gives a manufacturer complete control over their
product.
Online net banking or payment portals services like PAYTM, FREECHARGE, etc. are the
pure form of service sectors which are booming in this era of cashless economy. Here
the easy availability and tracking data of customers are less-expensive than traditional
record keeping techniques as well as it helps company to understand customer behavior
also and thus cause large distribution networks through online electronic channels and
mass media.
Benefits of electronic channels of services distribution:

Consistent delivery for standardized services: Generally, channels with human

interaction are likely to alter the service. But electronic channels ensure consistent
delivery of services without any alteration. Moreover, Services Marketing electronic
delivery does not interpret the service. Its delivery is the same in all transmissions. For
example, television programmes and radio stations ensure standardized electronic
distribution. TV stations deliver what is fed to them through the networks.
Low cost: Electronic media may prove to be more efficient in terms of delivery. For
example, the cost of reaching buyers using direct sales force is exorbitant. But the use of
electronic media such as television or radio costs less. However, it must be remembered
that personal interaction is powerful and effective. Interactive media can be used to
answer individual questions or tailor the service for individuals.
Customer convenience: Electronic channels enable customers to access a firms service
at any place at any time. E-commerce is changing the way people shop. Electronic
channels allow access to a large customer-base which would otherwise be inaccessible
to the service principals.
Wide distribution: Through electronic channels, the service provider is able to interact
with a large number of end users and intermediaries.
Customer choice: Electronic channels offer a wide variety of services to customers. If a
customer wants to renovate his kitchen, he may go to internet sites, specify his
requirements and place an order. Electronic channels enjoy the ability to customize the
services by offering a wide variety of choices to the customer.
Quick customer feedback: The major strength of e-commerce is rapid customer
feedback. Companies can find out immediately what customers think of their services.
Quick customer feedback enables the service principal to change their service offerings
immediately and address their problems quickly.
Q5. Briefly explain the various pricing strategies for a services.
Ans.
SERVICE PRICING IS DIFFERENT BECAUSE:

No Ownership of Services.
Higher Ratio of Fixed Costs to Variable Costs.
Variability of Both Inputs and Outputs.
Many Services Are Hard to Evaluate.
PRICING OBJECTIVES
The pricing policy must be based on the firms objectives, policies, concerning revenues, profit,
patronage, market share, market penetration, etc.
Survival
Present Profit Maximization
Present Revenue Maximization
Prestige
Product Quality Leadership
Market Oriented Pricing or Demand Based Pricing (Value Based Pricing):
As the name suggests the pricing is based on the demand behavior of the customers, i.e.,
setting prices consistent with customer perception of value prices which customers will pay
for the services rendered. Some are given below:
Market Skimming
Market skimming is offering high value or unique services by the service providers for
a higher price.
This happens where there are no competitors, and later when competitors come in
the prices may be reduced.
Penetration Pricing
This is to some extent the opposite of market skimming. The initial or introduction
price is kept at a low level so that it helps in market penetration. Slowly the value offer
increases and if the demand remains the prices can be enhanced.
This is appropriate in the following conditions, and care must be taken not to set at
too low a price, lest the normal enhancement will look unacceptable.
Price Discrimination This is also known as differential pricing, which is applied more
often. The major deciding factors are:
Place: For the customers who have a sensitivity to location, like cinema circles,
different rows of concerts.
Time: At different times of the day or any period, say peak and off-peak hours of
internet surfing, telephone service, etc.
 Quantity: For volume purchase, say for assurance for future purchases by the
customers the company offers a lower price. By this the firm locks or ascertains the
future business volume.
Incentives: This is usually given to the regular or more frequent users in the form of
incentives, discounts, etc.
Discounts: price cuts or mark- downs are very important and popular in the pricing
of services and goods.
These are offered on some occasions, like festive seasons, to a specific category of
customers, and may be in the lean seasons, etc. It attracts customers and the sales
volume increases.
Competition Based Pricing: This is another approach of pricing which relate to the
pricing made by the competitors. That doesnt always mean the prices to be the same as
the competitors. But the knowledge of their costs and pricing, and the customer
expectations acts as a starting point. This is applied in mostly two situations
When the services are standard across the providers,
In Oligopolies where there are a few large service providers.
Price Signaling:
This phenomenon occurs when there is a high concentration of sellers in the market.
Here the prices offered by one seller is matched by others to avoid any low-price
advantage to any seller.
Ex., in airline industries or mobile phone service if any provider drops the fares or
call rates others follow too.
Price Matching / Going rate pricing: This is adopted for playing safe in a mature market,
by pricing at the same level, like taxi service, internet caf, etc.
Price Bidding / Closed Bid Pricing: This strategy is mostly adopted by the construction,
building, manufacturing services and involves sending biddings to the buyer.
Destroyer Pricing:
It is setting such a low price that it cant be matched by any competitor, without
loss.
This is mostly used for driving the competition from the market.