406A - MARKETING OF SERVICES

UNIT – 1
Service
A service is any activity or benefit that one party can offer to another, which 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 are economic activities that create value and provide benefits for
customers at specific times and places as a result of bringing about a desired
change in – or on behalf of – the recipient of the service.’ – Christopher
Lovelock
A service business is one in which the perceived value of the offering to the
buyer is determined largely by the services provided to him than the products
offered. This includes the business of all intangible services delivered to the
customer. Some of the tangible services where both the goods and services are
provided to the customer, like restaurants and supermarkets, also come under
the purview of the services marketing.
According to Philip Kotler:
“A service is any activity or benefit that are being an offer to another that is
essentially intangible and does not result in the ownership of anything.”
Characteristics of Services
Intangibility
When thinking about the characteristics of services, intangibility may come to
your mind first. Service intangibility means that services cannot be seen, tasted,
felt, heard or smelled before they are bought. You cannot try them, like you
would maybe take a car on a test drive first. For instance, airline passengers
have nothing but a ticket and a promise that they will arrive at a certain time at a
certain destination. But there is nothing that can be touched.
Inseparability
Inseparability may not come to mind first when thinking about the
characteristics of services, but it is an important part of every service.
Inseparability means that services are produced and consumed at the same time.
This also entails that services cannot be separated from their providers. Contrary
to services, physical goods are produced, then stored, later sold, and even later
consumed. Services are first sold, then produced and consumed at exactly the
same time.
Variability
Variability is another key characteristic of services. It refers to the fact that the
quality of services can vary greatly, depending on who provides them and when,
where and how. Because of the labor-intensive nature of services, there is a
great deal of difference in the quality of service provided by various providers,
or even by the same providers at different times.
Perishability
Perishability means that services cannot be stored for later sale or use. In other
words, services cannot be inventoried. This is one of the most significant
characteristics of services, since it may have a major impact on financial results.
Doctors or dentists often charge patients for missed appointments because the
service value has foregone. The value existed only at that particular point and
disappeared when the patient did not come.

Lack of Ownership
Lack of ownership is another key service characteristic. It refers to the fact that
you cannot own and store a service like you can a product. This characteristic is
strongly linked to several other characteristics of services, such as intangibility,
perishability, and inseparability. The lack of ownership is actually so crucial to
understand services that we have mentioned it already. Remember the definition
of services: Services are a special form of product which consists of activities,
benefits or satisfactions offered for sale, which is intangible and does not result
in the ownership of anything.
Due to the lack of ownership, it is required to market services in a different way
than goods. The ownership of goods transfers with the sale, which also provides
an opportunity to the buyer to resell the good the providers.
Closing words
As you have seen, services are indeed special. The definition of services
indicates that services can take many forms. Also, services have characteristics
that make them unique – and they will become ever more important for the
world economy. Therefore, it is crucial to have an understanding of what is
meant when talking about services, but also of the many forms services can
take.
Importance of Marketing of Services
1. A Key Differentiator:
Due to the increasing homogeneity in product offerings, the attendant services
provided are emerging as a key differentiator in the mind of the consumers. For
Example – In case of two fast food chains serving a similar product (Pizza Hut
and Domino’s), more than the product it is the service quality that distinguishes
the two brands from each other. Hence, marketers can leverage on the service
offering to differentiate themselves from the competition and attract consumers.
2. Importance of Relationships:
Relationships are a key factor when it comes to the marketing of services. Since
the product is intangible, a large part of the customers buying decision will
depend on the degree to which he trusts the seller. Hence, the need to listen to
the needs of the customer and fulfil them through the appropriate service
offering and build a long lasting relationship which would lead to repeat sales
and positive word of mouth.
3. Customer Retention:
Given today’s highly competitive scenario where multiple providers are vying
for a limited pool of customers, retaining customers is even more important than
attracting new ones. Since services are usually generated and consumed at the
same time, they actually involve the customer in service delivery process by
taking into consideration his requirements and feedback. Thus they offer greater
scope for customization according to customer requirements thus offering
increased satisfaction leading to higher customer retention.
4. Relationships are Key:
In service marketing, because there is no tangible product, relationships are key.
Service marketers must listen to and understand the needs of customers and
prospective customers to build loyalty and trust. Ultimately, effective
relationships in service marketing will lead to repeat sales and positive word of
mouth.
5. Technology Impacts:
Technology is having a major impact on the service economy. You can use
technology to streamline service activities and provide do-it-yourself options for
consumers. Internet-based services, for instance, allow consumers to participate
actively in the service marketing process, often never involving contact with
another human being. Having a website is important, because people like to get
information about service providers before deciding which one to use.
Definition of Goods
Goods refer to the tangible consumable products, articles, commodities that are
offered by the companies to the customers in exchange for money. They are the
items that have physical characteristics, i.e. shape, appearance, size, weight, etc.
It is capable of satisfying human wants by providing them utility. Some items
are made for one-time use by the consumer while some can repeatedly be used.
Example: Books, pen, bottles, bags, etc.
Definition of Services
Services are the intangible economic product that is provided by a person on the
other person’s demand. It is an activity carried out for someone else.
They can only be delivered at a particular moment, and hence they are
perishable in nature. They lack physical identity. Services cannot
be distinguished from the service provider. The point of sale is the basis for
consumption of services. Services cannot be owned but can only be utilized.
You can understand this by an example: If you buy a ticket for watching a
movie at the multiplex, it doesn’t mean that you purchased the multiplex, but
you have paid the price of availing services.
Example: Postal services, banking, insurance, transport, communication, etc.
Differences Between Goods and Services
The basic differences between goods and services are mentioned below:
1. Goods are the material items that the customers are ready to purchase for
a price. Services are the amenities, benefits or facilities provided by
the other persons.
2. Goods are tangible items i.e. they can be seen or touched whereas
services are intangible items.
3. When the buyer purchases the goods by paying the consideration, the
ownership of goods moves from the seller to the buyer. Conversely, the
ownership of services is non-transferable.
4. The evaluation of services is difficult because every service provider has
a different approach of carrying out services, so it is hard to judge
whose services are better than the other as compared to goods.
 5. Goods can be returned to or exchanged with the seller, but it is not
possible to return or exchange services, once they are provided.
6. Goods can be distinguished from the seller. On the other hand, services
and service provider are inseparable.
7. A particular product will remain same regarding physical characteristics
and specifications, but services can never remain same.
8. Goods can be stored for future use, but services are time bound, i.e. if not
availed in the given time, then it cannot be stored.
9. First of all the goods are produced, then they are traded and finally
consumed, whereas services are produced and consumed at the same
time.
Classification of services
Classification of services can be done on the basis of two points. These two
points or factors, are further sub divided into 2 further variables. All in all,
service classification considers four types of people or objects.
1) Classification of service based on tangible action
Wherever people or products are involved directly, the service classification can
be done based on tangibility.
a) Services for people – Like Health care, restaurants and saloons, where the
service is delivered by people to people.
b) Services for goods – Like transportation, repair and maintenance and others.
Where services are given by people for objects or goods.

2) Classification of services based on intangibility

There are objects in this world which cannot be tangibly quantified. For
example – the number of algorithms it takes to execute your banking order
correctly, or the value of your life which is forecasted by insurance agents.
These services are classified on the basis of intangibility.
a) Services directed at people’s mind – Services sold through influencing the
creativity of humans are classified on the basis of intangibility.
b) Services directed at intangible assets – Banking, legal services, and
insurance services are some of the services most difficult to price and quantify.
The most intangible form of service output is represented by information
processing. The customer’s involvement in this type is service is not required.
Generally, customers have a personal desire to meet face to face but there is no
actual need in terms of the operational process. Consultancy services can be an
example of this type of services where the relationship can be built or sustained
on trust or telephone contact. However, it is more indicated to have a face-to-
face relationship in order to fully understand the needs of the customer.
Service Marketing Mix?
The service marketing mix is comprised of seven activities that are used to
optimize the marketing for a service. All seven activities are needed to achieve
the optimum level of service delivery. The activities are noted below.
Product
This is a service product, and so is not tangible. Instead, the seller must develop
a blueprint for how the service is to be structured. It is quite possible that a
service can be customized to match the needs of the individual customer, which
makes this a good service option.
Pricing
A number of pricing strategies can be used to assign a price to a service, such as
cost-based or market-based pricing. Unless a high level of unique value is being
provided, prices are usually capped at the going rate in the local area where the
services are being provided.
Promotions
This is the use of advertising and other activities to create a brand for a service.
Advertising tends to be heaviest in industry niches where service offerings are
easily duplicated; in essence, the level of advertising differentiates the service
being offered.
Placement
This defines where the service is to be located. An example of optimum
placement is near a residential area for a day spa. Or, a high-end restaurant
needs to be positioned near areas frequented by those people who can afford
expensive meals.
People
This is the quality and types of personnel used to provide the service. The
quality level will drive price points, since higher-quality personnel are more
expensive. This issue should lead service businesses to offer more training to
their customer-facing employees.
Process
This is the manner in which a service is provided to a customer, such as very
quickly or more slowly but with great accuracy or attention to detail. A business
can define processes quite thoroughly in their operating procedures.
Physical Evidence
This is the environment in which the service is rendered. For example, a private
banking service may involve the use of plush offices for meeting with clients,
while a day spa will create a calm and restful atmosphere.
The sum total of these activities comprises the full set of marketing activities
used for a service product.
Problems in Marketing Services:
1. A service cannot be demonstrated.
2. Sale, production and consumption of services takes place simultaneously.
3. A service cannot be stored. It cannot be produced in anticipation of demand.
4. Services cannot be protected through patents.
5. Services cannot be separated from the service provider.
6. Services are not standardized and are inconsistent.
7. Service providers appointing franchisees may face problems of quality of
services.
Marketing Framework for Service Business
1.Define your marketing goals.
The key here is to align your marketing goals with your overall business
objectives. Understand marketing doesn’t exist by itself in a vacuum. To be
effective, make your goals as specific and concrete as possible. This will help
you focus as well as to measure the results.
 Build your brand or establish your thought leadership.
 Acquire and retain customers.
 Drive profitable sales
2.Identify your audience
Create a fully realized composite of your target market. This requires
developing a marketing persona and a social media persona so that you can
tailor your marketing to meet the needs of your audience. the three main
attributes to define your audience.
 Demographic traits.
 Psychographic characteristics.
 Behavioural actions.
3.Create the offer.
Describe the specifics of your product and/or service. This goes beyond the
basic offering and encompasses related information, branding and pricing that
sets your offering apart from competitors and near substitutes. Use the
following questions organized around the traditional four P’s of marketing to
help develop your offering.
 Product
 Price
 Promotion
 Pricing
4. Develop your creative.
Broadly defined, creative relates to how your product/service is presented to
prospects, customers and the public. It encompasses five distinct components.
 Branding. 
 Product benefits.
 Media platform..
 Call-to-action.
 Response channels
5. Choose your channel (aka medium and/or format).
A combination of distribution and promotion are needed to ensure that your
content or promotion reaches its maximum potential audience in a format that
they find easy-to-consume including text, photographs, video, audio or PDFs.
The media used should be aligned with your business goals to reach the
appropriate target audience. (Here’s an outline and chart of these media types.)
 Owned media..
 Third-party media.
 Social media
6. Test your marketing.
Continually test various aspects of your marketing to maximize your results.
Think holistically across the entire marketing process in terms of the four
moments of truth. You need to keep optimizing your process to improve the
bottom line. Further, run tests more than once to ensure results aren’t flukes and
understand that factors may change over time. For example, promotions wear
out over time. Start by testing on the areas that have the largest impact on your
sales process.
 Target market
 Offer
 Creative.
 Media
 Devices
7. Determine your success metrics
You must assess your results to determine your marketing’s effectiveness in
achieving your intended goals. To this end, it’s helpful if your goals are specific
and measurable.
Understand that each of these seven elements must be adapted to your specific
goals to ensure that you’re focused on accomplishing your business objectives.

Consumer behaviour & Service

Consumer behavior is the actions and the decision processes of people who
purchase goods and services for personal consumption” – according to Engel,
Blackwell, and Mansard,
All of us buy different services for various reasons. One person may prefer to
go to a restaurant for good food while the other may opt for an exclusive
restaurant, for status. One person may prefer to read 'The Times of India' early
in the morning, while the other may prefer to read the same newspaper after
coming back from the office. There are women who don't go to beauty parlors
at all, whereas there are others who go regularly. Similarly, there are many such
examples telling us that people show different behavior in buying and using
different products and services.
In the purchase of any particular service six distinct roles are played. These are:
i) Initiator: The person who has a specific need and proposes to buy a
particular service.
ii) Influencer: The person or the group of people who the decision maker
refers to or who advise. These could be reference groups, both primary
and secondary. It could be even secondary reference group like word
of mouth or media, which can influence the decision maker.
iii) Gatekeepers: The person or organization or promotional material
which acts as a filter on the range of services which enter the decision
choice set.
iv) Decider: The person who makes the buying decision, irrespective of
whether he executes the purchase himself or not. He may instruct
others to execute. It has been observed at times, more typically in
house hold or family or individual related services, one member of the
family may dominate in the purchase decision.
v) Buyer: The person who makes the actual purchase or makes bookings
for a service like travel. hotel room, hospital, diagnostic lab, etc.
 vi) User: The person who actually uses or consumes the product. It can be
other than the buyer. In a number of services, it has been observed that
users are also the influencers.

UNIT – 2

Market Segmentation & Service Positioning

Segmentation refers to the process of dividing your audience into smaller
groups based on certain characteristics. This process allows you to group your
individual audience members into similar groups so you can better
communicate your products, features, and benefits that may be most relevant to
them.
You can segment your audience based on one or more of these criteria:
 Demographics, which typically answer the question of who your buyer is
(e.g. age, gender, education, location, and profession)
 Psychographics, which answer the question of why your buyer buys (e.g.
priorities, personality traits, and beliefs and values)
 Lifestyle traits, such as hobbies, entertainment preferences, and non-
work activities
 Behavior, such as brand loyalty, channel preferences, and other shopping
habits
Segmentation may sound a little familiar to another process we often discuss —
creating buyer personas. The two are very similar as they help you drill down
the most important factors in your target audience.
But where buyer personas help you create a handful of customer profiles that
represent your broader audience, segmentation allows you to split your audience
into countless groups, each of which you can uniquely target.
For example, let’s say Paws & Tails is a Chicago pet-sitting company that offers
pet-sitting, dog walking, and boarding services. Given the vast number of pet
owners in the city, they need to segment their audience into smaller groups to
better understand how to position their services.

Positioning is defined as the process of establishing and maintaining a

distinctive place in the market for an organisation and/or its products/services
offerings. This is the creating of a distinct place in the minds of a customer, or
the perception of a customer w.r.t. other companies or their products/services.

Positioning offers the opportunity to differentiate any service. Each service firm
and its goods and services has a position or image in the consumer’s mind and
this influences purchase decisions. Positions can be implicit and unplanned and
evolve over a period of time or can be planned as part of the marketing strategy
and then communicated to the target market. The purpose of planned
positioning is to create a differentiation in the customer’s mind which
distinguished the company’s services from other competitive services. It is
important to establish a position of value for the product or service in the minds
of the target market, i.e. it must be distinguishable by an attribute, or attributes,
which are important to the customer. These attributes should be factors which
are critical in the customer’s purchase decision.
A successful positioning strategy takes into account customers’ existing
perceptions of market offerings. It determines needs which customers value and
which are not being met by competitors’ services. It identifies which unsatisfied
needs could be satisfied. The positioning strategy seeks to integrate all elements
of the service, to ensure that the perceived position of the service is strongly
reinforced.
Services have a number of distinguishing characteristics which have special
implications for the positioning and selection of which attributes to emphasize.
Three of the key characteristics of services, make positioning strategies of
particular importance in marketing a service. These are the intangibility, the
degree of variability or heterogeneity in quality of a given service, and
inseparability — the fact that the performance of a service will often occur in
presence of a customer.

Advertising
Advertising is a promotional activity which aims to sell a product or service to a
target audience. It is one of the oldest forms of marketing which attempts to
influence the actions of its target audience to either buy, sell, or do something
specific. Using a highly tailored message the advertisement can be niche
(targets a small audience) or general (targets a large audience).
Advertising is a marketing tactic involving paying for space to promote a
product, service, or cause. The actual promotional messages are called
advertisements, or ads for short. The goal of advertising is to reach people most
likely to be willing to pay for a company’s products or services and entice them
to buy.
Traditional advertising outlets include newspapers, magazines, TV and radio
stations. Today, however, advertisements are placed nearly everywhere and
anywhere, including:
 Roadside billboards
 Sides of buildings
 Websites
 Electronic newsletters
 Print newsletters
 Inside bills
 Product packaging
 Restaurant placemats
 Event bulletins
 Store windows
 The sides of cars and trucks
 Subway car walls
 Airport kiosks
 Sporting arenas
 YouTube videos

Branding of Service
Service Branding is a strategy in which a provider’s services become its
products, which can then be uniquely marketed to optimize reach and sales.
Service branding plays an important role in the contribution to value creation
and economic growth at the company level. Unlike products, services are not
tangible
Although the principles for branding of goods and services are generally the
same there occur some differences. These arise from the different natures of
both categories. The main differences that influence branding policies are that
services;
1. Have a changing level of quality,
2. The consumer has to become involved in the consumption of a service
actively,
3. They are intangible and not storable.
When a brand in general gives the consumer more confidence in his choice this
is even more important for services. Their quality and other features are more
difficult to asses. Because of their intangibility and complexity it is harder for
the customer to distinguish between the offers from the wide range of service
companies are working in the market place.
Relationship Marketing
Relationship Marketing is a modern approach to marketing which focuses on
enhancing the customer experience and developing customer loyalty rather than
increasing the sales volume and profit of the organization. Keeping the
customers engaged and providing them with the highest possible value from
their purchase is essential. Here comes the role of relationship marketing.
Importance of Relationship Marketing
 Increase in Sales Volume: Enhanced customer experience means an
easy upselling and cross-selling of goods or services to satisfied
customers. This ultimately increases sales volume.
 Low Advertisement Cost: A successful relationship marketing reduces
the efforts on customer acquisition since it helps in retaining customers
for long-term. Thus, decreasing the advertisement cost.
 High-Profit Better Price: A satisfied customer tends to bargain less for
the prices and is ready to pay a fair price for the goods or services. This
increases the profit margin of the seller.
 Creates Brand Image: A happy customer will promote the product or
service among their peers, relatives and the known ones. This word of
mouth creates a strong brand image of the organization.
 Customer Retention: Customer acquisition is not everything; meeting
the customer needs, creating value for the customers and making them
buy again and again is essential. All this is possible through customer
relationship marketing.
 Gain a Competitive Edge: A loyal customer feels comfortable buying
goods or services from one single store rather than shopping around at
various places. This is an advantage for the organization over its
competitors.