THE CHALLENGES OF SERVICE MARKETING

MANAGEMENT
Service Marketing Management emerged as a separate field of study only in the early 1980s,
when the distinct characteristics of service marketing management finally dawned on marketers.

Simply put, service marketing management deals with the actions and processes that enable a
service provider to deliver services to end consumers.

The services sector includes industries like banking, insurance, communications, consulting,
non-profits, travel and transportation, and all other businesses that do not produce tangible
goods.

1. INTANGIBILITY

Consumers can see and touch goods—they’re a physical product. They know exactly what
they’re buying when they’re spending their money. They may even be able to carry the item
away with them—although they have to drive off the lot when they buy a car.

This portability is not the case with services. The effects of services may not be apparent
immediately, and what’s done is not always obvious. The client of a management consultant, for
example, may have to wait for months (or years) before they can see the results.

Lack of Emotion: Physical products can trigger an emotional impulse compelling the customer
to buy. Color, shape, and style are important for physical products—especially those aimed at the
general public.

No such built-in emotional appeal exists in the intangible world of services. The consumer might
have a hard time even imagining all the details involved in what is done for them by a service
business.

No product or service can be completely tangible or intangible, of course. For example, a law
firm selling legal services needs business cards, computers, and other tangible objects to practice
law—but the firm’s clients aren’t paying for them. Similarly, a hardware store will need
salespeople, guarantees, and operating manuals and lessons to sell drill machines or table saws.

Even so, it’s easy to tell the difference between a service business and a tangible goods business.

2. LACK OF OWNERSHIP

You can buy a product, take it home, own it for years, and perhaps even resell it. But you can’t
do the same with a service. You can avail it only for a specific period of time and then it’s over--
unless you pay again. The lack of physical ownership makes it harder to sell services.
Even companies don’t own and control services the way they can control tangible products. It’s
because service delivery depends on human interactions between the service provider’s
employees and customers.

3. PERISHABILITY

Another defining quality of services is that they are perishable. I don’t mean that they will spoil,
but they are time-bound. You can’t build an inventory or store services like you can with
physical products. Services are usually performed at specific times and on stated dates.

A dentist cannot start a procedure until the patient is in the chair. An airline cannot sell a seat on
a flight that has already left the gate.

4. HETEROGENEITY

Services are heterogeneous. Service businesses operate through several diverse elements and
interactions. A bank may offer customer service through a helpline or website and cash
withdrawals through ATMs and counters.

In most industries, the service delivery process involves a lot of human interaction. As human
behavior is subjective and unpredictable, no two sets of services can be identical in their details
and results.

5. INTERACTIVITY

Service delivery depends on a chain of interactions between customer and service provider, as
well as between the people working inside the service provider.  The customer is central to the
whole process and all activities must aim at their satisfaction.

Prosumership: For the service to be delivered, the consumer needs to cooperate and coordinate
with the service provider. For example, if you’re offering bill payment over the internet—the
service—the consumer must have a valid payment method and a working internet connection,
and be able to use both of them.

Service marketing experts call it “prosumership”. Service consumers (or prosumers) have to
proactively participate in the service delivery process.

The degree of this cooperation will vary among different types of services. But it must be present
to make service delivery possible. No such cooperation is required for delivering physical
products.

7 Important Characteristics of Services

1. Perishability:

Service is highly perishable and time element has great significance in service marketing.
ADVERTISEMENTS:

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 personalised services
are created and consumed simultaneously.

ADVERTISEMENTS:

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 standardised. 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 standardised. 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 employee’s 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.
Difference Between Goods and Services

Basis for
Goods Services
Comparison
Goods are the material items that can be Services are amenities, facilities,
Meaning seen, touched or felt and are ready for sale benefits or help provided by other
to the customers. people.
Nature Tangible Intangible
Transfer of
Yes No
ownership
Evaluation Very simple and easy Complicated
Services cannot be returned back
Return Goods can be returned.
once they are provided.
Yes, goods can be separated from the No, services cannot be separated
Separable
seller. from the service provider.
Variability Identical Diversified
Goods can be stored for use in future or
Storage Services cannot be stored.
multiple use.
Production and There is a time lag between production Production and Consumption of
Consumption and consumption of goods. goods occurs simultaneously

Service delivery framework

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A service delivery framework (SDF) is a set of principles, standards, policies and constraints to
be used to guide the designs, development, deployment, operation and retirement of services
delivered by a service provider with a view to offering a consistent service experience to a
specific user community in a specific business context.[further explanation needed] An SDF is the context in
which a service provider's capabilities are arranged into services.

The term service delivery framework (SDF) has been used interchangeably with the term
service delivery platform (SDP), which is a set of technology components that provide
capabilities. An SDF governs and guides the use of SDP capabilities.

Customer perceived value is a concept widely used in marketing and branding circles. Customer
perceived value is the notion that the success of a product or service is largely based on whether
customers believe it can satisfy their wants and needs. In other words, when a company develops its
brand and markets its products, customers ultimately determine how to interpret and react to
marketing messages. Companies spend significant time researching the market to get a sense of how
customers think and feel.

Customer Perceived Value = Total Perceived Benefits – Total Perceived Costs

The CPV is kind of an evaluation done by customer on what value a product or a service would
be able to provide if he/she buys it by paying money.

Please note that the benefits and costs also include the emotional benefits and costs.

Example of Customer Perceived Value:

While buying a car, the expected reactions from family and friends also become a part of
benefits or gain. The customer evaluates whether the particular car would be able to provide
whatever he/she is looking for from a car. Whether the car would provide the comfort and the
usability. Also for many customer the perceived value would also include the mileage a car
gives.Hence, this concludes the definition of Customer Perceived Value (CPV) along with its
overview.

SERVICE BLUEPRINT:

A service blueprint is an operational planning tool that provides guidance on how a service will
be provided, specifying the physical evidence, staff actions, and support systems / infrastructure
needed to deliver the service across its different channels. For example, to plan how you will
loan devices to users, a service blueprint would help determine how this would happen at a
service desk, what kinds of maintenance and support activities were needed behind the scenes,
how users would learn about what’s available, how it would be checked in and out, and by what
means users would be trained on how to use the device.

Service Blueprints may take different forms – some more graphic than others – but should show
the different means/channels through with services are delivered and show the physical evidence
of the service, front line staff actions, behind the scene staff actions, and support systems. They
are completed using an iterative process – taking a first pass that considers findings from
personas, journey maps, and location planning and then coming back to the blueprint to refine it
over time. Often blueprints raise questions that cannot be readily answered and so need to be
prototyped; for instance by acting out an interaction or mocking up a product. Generally, one
blueprint should be created for each core service, according to the right level of detail for each.

Example and Tool

Service Blueprint Example – Downloadable example (PDF).

Service Blueprint Template – Editable template for your use. Please download as MS Word doc
or log-in to your Google docs account to ‘Make a copy’ and edit directly.
Sub-Processes of Service Delivery
Service Level Management

Process Objective: Service Level Management has the tasks of maintaining the IT
Organization's Service Catalogue and reaching binding agreements for internal and
external Service Performances. At the interface with the client, Service Level
Agreements are agreed. The Service Level Manager is responsible for the monitoring of
the agreed quality parameters and where necessary resorts to counter-measures. The
adequate provision of internal IT Services is secured via Operational Level Agreements
and Underpinning Contracts (OLAs/ UCs).
Availability Management
Process Objective: Availability Management allows IT Organizations to sustain the
availability of the IT infrastructure in order to meet the agreed Service Levels defined in
SLAs. It constantly monitors the achieved availability levels and where necessary,
undertakes corrective measures.
Capacity Management
Process Objective: Capacity Management supports the optimum and cost effective
provision of IT Services by helping IT Organizations match their IT Resources
(Software, Hardware, Human Resources) to the business needs. The process involves
estimations of future demand, which are the basis for planning future capacity needs,
resulting in the Capacity Plan.
IT Service Continuity Management
Process Objective: IT Service Continuity Management defines and plans all measures
and processes for unpredicted events of disaster. The regular analysis of vulnerabilities,
threats and risks represents a basis for suitable precautions.
Financial Management for IT Services
Process Objective: Financial Management for IT Services ensures the most economical
usage of IT Financial resources and charges clients for the provision of IT Services.
During this, a balanced relationship between quality and costs must be achieved whilst
taking into account the client's requirements. The carrying out of the regular budget
planning and the clearance of approved financial means is also one of Financial
Management's tasks.

Four Key Elements of a Service Delivery System

1. Service Culture is built on elements of leadership principles, norms, work habits and
vision, mission and values. Culture is the set of overriding principles according to which
management controls, maintains and develops the social process that manifests itself as
delivery of service and gives value to customers. Once a superior service delivery system
and a realistic service concept have been established, there is no other component so
fundamental to the long-term success of a service organization as its culture.
2. Employee Engagement includes employee attitude activities, purpose driven leadership
and HR processes. Even the best designed processes and systems will only be effective if
 carried out by people with higher engagement. Engagement is the moderator between the
design and the execution of the service excellence model.
3. Service Quality includes strategies, processes and performance management systems.
The strategy and process design is fundamental to the design of the overall service
management model. Helping the client fulfil their mission and supporting them in the
pursuit of their organizational purpose, must be the foundation of any service provider
partnership.
4. Customer Experience includes elements of customer intelligence, account management
and continuous improvements. Perception is king and constantly evaluating how how
both customer and end-user perceive service delivery is important for continuous
collaboration. Successful service delivery works on the basis that the customer is a part of
the creation and delivery of the service and then designs processes built on that
philosophy – this is called co-creation.

Services Marketing Triangle

The Services Marketing Triangle (or Services Triangle) shows the key actors involved in
marketing a service business. It also shows the key marketing activities that occur between those
actors.

Before we look at the model it is important to note that we are only concerned with the
marketing of services. The model does not apply to products. We define services using these
criteria:

 Intangible: you cannot see, taste, or touch them.

 Inseparable: you cannot separate production from consumption.
 Perishable: you cannot store them, save them, or return them.
 Heterogeneous: you cannot mass produce them as they are unique.

Examples of services include hotel rooms, flights, and health club membership.

Services businesses are marketed on promises. These are the promises we make to customers and
whether we keep or fail to keep those promises. The Services Marketing Triangle is a visual
strategic model. It reinforces the importance of people in a company’s ability to keep its
promises.

The Services Marketing Triangle

The Services Marketing Triangle is shown in the following diagram. It shows the key marketing
activities that happen between the key actors within services businesses.

businesses.
Each actor works together to develop, promote, and deliver a company’s service. As you can see
from the diagram we represent actors by the points of the triangle. Our actors are:

 Company: refers to the leadership team of the company in question.

 Employees: refers to all employees, including subcontractors who deliver the company’s
service.
 Customers: refers to all customers and potential customers of the company.

The lines between the points show the different types of marketing that must occur:

 External Marketing: occurs between the company and its customers.

 Internal Marketing: occurs between the company and its employees.
 Interactive Marketing: occurs between the employees and the customers.

External Marketing
Companies use external marketing to make promises to customers. External marketing is any
communication to customers (or potential customers) that happens before service delivery starts.

Forms of external marketing include:

 Advertising
 Personal selling
 Public relations (PR)
 Direct marketing

We use external marketing to achieve many aims including:

 Creating awareness.
 Setting price expectations.
 Setting service level expectations.
 Informing customers if any prerequisites that must be in place before they can use the
service.

Internal Marketing
Within a services business, we view employees as internal customers. They are a market which
we must please first as a company. The leadership team should be focused on satisfying its
employees so that they want to better serve customers.

Internal marketing involves motivating employees to work as a team to make customers

satisfied. This is obviously true for customer service representatives. It can equally be applied to
all employees. This results in everyone, at all levels of the organization, being empowered to
deliver great customer service.

Key components of internal marketing include:

 Motivating employees
 Teaching customer satisfaction techniques
 Communicating company goals regularly
 Management of change
 Training staff on how to use the company’s services
 Good pay and working conditions

Interactive Marketing
Interactive marketing occurs when employees and customers interact. It is here where the
promises made during external marketing are either kept or broken by employees or sub-
contractors.
Each significant interaction between an employee and a customer is known as a service
encounter.

Interactive marketing is important because it establishes both short-term and long-term

satisfaction. That is, if the customer is satisfied with the service they received in the short-term,
they are more likely to be satisfied over the longer term.

Services Marketing Triangle Example

To wrap things up let’s consider a simple example, that of a luxury hotel.

First, let’s consider external marketing. A luxury hotel may want to educate customers through
advertising and public relations. Here, they will want to inform customers that their rooms have
the finest quality fixtures, fittings, and toiletries. They are likely to also want to convey that their
staff are knowledgeable and very willing to help with whatever request a customer may have.

To deliver these promises the company focuses on internal marketing. It establishes more
concierge roles within the hotel than the industry average. This helps ensure that staff feel they
have the time they need to help each customer to the best of their ability. Employees are also
trained on the local area, local activities, and excursions. The company also teaches every
employee how to handle and diffuse difficult guests and situations.

One of the ways that the hotel handles interactive marketing is as follows. They employ someone
to manage their social media presence and reputation.

Now suppose a guest tweeted that they are in their room preparing for an important meeting the
next day. This would be noticed by the member of staff managing the hotel’s social media
presence. Then, whilst the guest is at their meeting the hotel might leave a handwritten note and
some chocolates in their room.

The note will wish that their meeting went well. The chocolates will make them feel cared about
and listened to. This makes the customer feel valued in the short term. It also makes them more
likely to remain a customer over the long-term.

Porter's Value Chain

 
The idea of the value chain is based on the process view of organisations, the idea of seeing a
manufacturing (or service) organisation as a system, made up of subsystems each with inputs,
transformation processes and outputs. Inputs, transformation processes, and outputs involve the
acquisition and consumption of resources - money, labour, materials, equipment, buildings, land,
administration and management. How value chain activities are carried out determines costs and
affects profits.

Most organisations engage in hundreds, even thousands, of activities in the process of converting
inputs to outputs. These activities can be classified generally as either primary or support
activities that all businesses must undertake in some form.

According to Porter (1985), the primary activities are:

1. Inbound Logistics - involve relationships with suppliers and include all the activities
required to receive, store, and disseminate inputs.
2. Operations - are all the activities required to transform inputs into outputs (products and
services).
3. Outbound Logistics - include all the activities required to collect, store, and distribute
the output.
4. Marketing and Sales - activities inform buyers about products and services, induce
buyers to purchase them, and facilitate their purchase.
5. Service - includes all the activities required to keep the product or service working
effectively for the buyer after it is sold and delivered.

Secondary activities are:

1. Procurement - is the acquisition of inputs, or resources, for the firm.

2. Human Resource management - consists of all activities involved in recruiting, hiring,
training, developing, compensating and (if necessary) dismissing or laying off personnel.
3. Technological Development - pertains to the equipment, hardware, software, procedures
and technical knowledge brought to bear in the firm's transformation of inputs into
outputs.
4. Infrastructure - serves the company's needs and ties its various parts together, it consists
of functions or departments such as accounting, legal, finance, planning, public affairs,
government relations, quality assurance and general management.