Unit-1

UNDERPINNING CONCEPTS OF SERVICES MARKETING

Unit-1 Concepts in Service Marketing 1

 What is a Service?
 A service is an act or performance offered by one party to another.
Although the process may be tied to a physical product, the
performance is essentially intangible and does not normally result
in ownership of any of the factors of production. 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 the recipient of the service. (Christopher
Lovelock)

 Services are deeds, processes, and performances.

Services are not tangible things that can be
touched, seen, and felt, but rather are intangible
deeds and performances. (Zeithaml and Bitner)

Unit-1 Concepts in Service Marketing 2

 What is a Service?
 A service is an activity or series of activities of more or less
intangible nature that normally, but not necessarily, take
place in interactions between customer and service
employees and/or physical resources or goods and/or
systems of the service provider, which are provided as
solutions to customer problems. (Christian Gronroos)

 Services include all economic activities whose

output is not a physical product, is generally
consumed at the time it is produced, and provides
added value in forms that are essentially
intangible concerns of its first purchaser.( Quinn,
Baruch, and Paquette)

Unit-1 Concepts in Service Marketing 3

 Ctd…
 A precise definition of goods and services should distinguish
them on the basis of their attributes.
 A good is a tangible physical product that can be created and
transferred; it has an existence over time and thus can be
created and used later.
 A service is intangible and perishable. It is an occurrence or
process that is created and used simultaneously. While the
consumer cannot retain the actual service after is produced,
the effect of the service can be retained. (Sasser, Olsen, and
Wyckoff)
 A service is a time-perishable, intangible experience
performed for a customer acting in the role of co-producer.
(James Fitzsimmons)

Unit-1 Concepts in Service Marketing 4

Conceptualizing The Service ‘Offering’

Unit-1 Concepts in Service Marketing 5

Conceptualizing The Service ‘Offering’

Examples of core benefits of services:

Rail travel – safe and reliable transportation
Tax consultant – peace of mind
Education Course – career enhancement,
self-actualization
Hotel–hospitality, rest and
recuperation/recovery/convalescence

Hairdresser – feel more attractive,

confidence-booster.
Unit-1 Concepts in Service Marketing 6
Core and Secondary/Supplemental Aspects
Of An Airline Service
Cleanliness of
plane and airport
lounges

Regular & Airport

fast check-in Transport guidance and
facilities directions
Addis
Ababa -
Refreshment on London Helpfulness of
request and check-in &
catering airline staff
services
Entertainment/in-
flight movies/ games
for children

Unit-1 Concepts in Service Marketing 7

Concepts of tangible and intangible dimensions

 The tangible/intangible dimensions as a basis for

conceptualizing different types of services, simple to
complex.
 Customer expectations have two dimensions:
instrumental and psychological aspects. (Gronroos)
 The ‘instrumental’ dimension: the ‘what’ of service delivery.
 The psychological dimension: the ‘functional’ aspects or ‘how’
of service delivery
 Create good ‘functional’ quality as well as ‘technical’
quality and so contribute to the overall image of the
service package and service company.

Unit-1 Concepts in Service Marketing 8

Tangible And Intangible Dimensions Of Service Delivery

Tangible Elements:Relatively Intangible Elements: Relatively

Easy To Measure Difficult To Measure

Physical facilities Image

Credit facilities Congenial atmosphere
Speed of delivery Security/confidentiality
Technical expertise/support Advice/guidance
Appearance of staff Competence of staff
Responsiveness
Accessibility/courtesy
Individual customer service

Unit-1 Concepts in Service Marketing 9

 Scope of Services
Service Activities Service As A Concept

Customer service A service organization

Service based activities As a core product

Value added activities As an augmented

product
As product support

As an act

Unit-1 Concepts in Service Marketing 10

 Service as an organization

 Service as an organization, that is the entire business or not-for-

profit structure that resides within the service sector.
 For example, a restaurant, an insurance company, a charity.

a)Service As Core Product

 The commercial outputs of a service organization such as a bank account, an
insurance policy or a holiday.

b)Service as product augmentation

 Any peripheral activity designed to enhance the delivery of a core product.
 For example, provision of a courtesy car, complimentary coffee at the
hairdressers.

c) Service As Product Support

 any product- or customer-oriented activity that takes place after the point of
delivery.
 For example, monitoring activities, a repair service, up-dating facilities.

Unit-1 Concepts in Service Marketing 11

Industries Classified Within The Service Sector
 Transportation
 Public utilities
 Communication
 Wholesale and retail trade
 Finance and banks
 Insurance
 Real estate
 Hotels
 Theatre halls
 Auto repair
 Health services
 Legal services
 Federal and state government

Unit-1 Concepts in Service Marketing 12

 Services Versus Customer Service

 Services are provided for sale by a company.

 Customer service is the service provided in support of a
company’s core products.
 It includes:
 Answering questions
 Taking orders

 Dealing with billing issues

 Handling complaints

 Scheduling maintenance or repairs

There is no charge for customer service

Quality customer service is essential to building
customer relationships

Unit-1 Concepts in Service Marketing 13

 Dependency of Manufacturing on Services

Value-Added Services Infrastructures Services

Financing Communication
Leasing Transportation
Insurance Utilities
Banking

Personal Services
Distribution Services Health care
Manufacturing Service Wholesaling Restaurants
inside Company: Retailing Hotels
Finance Repairing
Accounting
Legal, and R&D Consumer
(Self-Service)

Business Services
Supporting Government Services
Manufacturing: Military
Consulting Education
Auditing Judicial
Advertising Police and fire protection
Waste disposal

Unit-1 Concepts in Service Marketing 14

 Tangibility Spectrum

Intangibility is a key determinant of whether

an offering is or is not a service.
Very few products are purely intangible or
totally tangible i.e., there are very few “pure
services” or “pure goods”
Services tend to be more intangible than
manufactured products, and manufactured
products tend to be more tangible than
services.

Unit-1 Concepts in Service Marketing 15

 Why Services Marketing?
1.A service based economy
 Economic importance of services:
 The service sector represents major share of GDP
 The service sector has become a major employer
 Trade in services is growing world wide
2.Services as a business imperative in Manufacturing
and IT
 Manufacturing and technology industries revenues and profit are
coming from services
 Customers not only expect excellent, high-quality goods; they
also expect high levels of services all with them.
 As manufacturers and IT companies become more and more
service-focused, the need for special concepts and approaches for
managing and marketing services becomes even more apparent.

Unit-1 Concepts in Service Marketing 16

 Why Services Marketing?
3.Services marketing is different
 More variable exist in the marketing mix of
services than for consumers goods.
 Marketing and operations are more closely linked.
 Customer/employee interface is high
 Pricing of services is difficult.
 Promotional price cuts tended to erode
positioning and image.

Unit-1 Concepts in Service Marketing 17

 Differences In Goods Vs. Services Marketing
Goods Services Resulting Implications
Tangible Intangible Services cannot be inventoried
Services cannot be patented
Services cannot be readily displayed or communicated.
Pricing is difficult

Standardized Heterogeneous Service delivery and customer satisfaction depend on

(variable) employee actions.
Service quality depends on many uncontrollable
factors.
There is no sure knowledge that the service delivered
matches what was planned and promoted.
Production separate Simultaneous Customers participate in and affect the transaction.
from consumption production and Customers affect each other.
consumption Employees affect the service outcome.
(inseparable) Decentralization may be essential.
Mass production is difficult
Nonperishable Perishable It is difficult to synchronize supply and demand with
services.
Services cannot be returned or resold

Unit-1 Concepts in Service Marketing 18

 Classification of Service
Level 1: Nature of Organization
Category Option AAUCC
Purpose (satisfy needs of) Individuals Purpose is to satisfy the needs of
Business both individuals, government
Both agencies, NGOs and business
firms.
Structure Profit structure is a government
Nonprofit organization
Type Public Type is a public institution
Private
Level 2: Nature Of Service
Degree of tradability Embodied service Degree of tradability is a pure
Pure service service
Service directed toward Individuals Service is directed toward
Things individuals
Degree of merchantability High Degree of merchantability is low
Medium
Low
Unit-1 Concepts in Service Marketing 19
 Ctd…
Level 4: Nature of Demand
Level of demand Demand exceeds capacity Demand exceeds capacity
Demand equals capacity
Capacity exceeds demand
Degree of fluctuation Wide Degree of fluctuation is variable
Narrow
Variable
No fluctuation

Level 5: Service Package

Number of services and One service Multiple service
goods One service, one good
One service, multiple goods
Multiple services
Multiple services, one good
Multiple services, multiple
goods
Degree of equipment base High Degree of equipment base is medium
Medium
Low

Unit-1 Concepts in Service Marketing 20

Ctd…
Level 6: Delivery Method

Availability of service One site Availability of service is at

Multiple sites multiple sites

Nature of delivery Continuous Nature of delivery is discrete

Discrete
Both

Type of consumption Independent Type of consumption is

Collective collective
Both

Allocation of capacity Reservation Allocation of capacity is

Order-of-arrival preferential
Preferential

Unit-1 Concepts in Service Marketing 21

The Service Process Matrix
(Roger Schmenner)

Unit-1 Concepts in Service Marketing 22

 Ctd…
 The Service Process Matrix is a two dimensional model
developed by Roger Schmenner
1) The vertical dimension measures the degree of
labor intensity - the ratio of labor cost to
capital cost.
2) The horizontal dimension measures the
degree of customer interaction and
customization, which describes the ability of
the customer to affect personally the nature of
the service being delivered.

Unit-1 Concepts in Service Marketing 23

 Ctd…
a) Service Factories - provide a standardized service
with high capital investment, much like a line-flow in a
high-capital environment.
b) Service Shops - provide a customized service with
high capital investment.
c) Mass Services - provide an undifferentiated service or
standardized service in a labor intensive environment.
d) Professional Services – Customers seeking a
professional service will be given individual attention by
highly trained specialists

Unit-1 Concepts in Service Marketing 24

 THE SERVICES MARKETING TRIANGLE

 The services marketing triangle shows the three interlinked

groups that work together to develop, promote and deliver
services.

The key players are:

 The company
 The customers, and

 The providers

 There are three types of marketing that must be successfully

carried out for a service to succeed:
 External marketing: Making promises

 Internal marketing: Enabling promises

 Interactive marketing: Keeping promises

Unit-1 Concepts in Service Marketing 25

The Service Marketing Triangle

Unit-1 Concepts in Service Marketing 26

 i) EXTERNAL MARKETING: MAKING PROMISES

External marketing is just the beginning for

services marketers: Promises made must be
kept.
A company makes promises to its customers
regarding what they can expect and how it will be
delivered.
 Traditional marketing activities such as
advertising, sales, special promotions, and
pricing facilitate this type of marketing.
 For services the design and decor of the
facility, and the service process itself also
communicate the promise to customers.
Unit-1 Concepts in Service Marketing 27
ii)INTERACTIVE MARKETING: KEEPING PROMISES

Keeping promises or interactive

marketing is critical from the customer's
point of view.
Service promises are kept or broken by
the employees of the firm or by third-
party providers in real time.
Promises are kept or broken and the
reliability of service is tested every time
the customer interacts with the
organization.

Unit-1 Concepts in Service Marketing 28

 iii) INTERNAL MARKETING: ENABLING PROMISES

 To deliver on the promises made, service providers

must have the skills, abilities, tools, and motivation.
i.e. they must be enabled.
 Enabling involves:
 Recruiting,
 Training

 Providing with tools and appropriate internal systems

 Rewarding for good service

 Internal marketing hinges on the assumption that

employee satisfaction and customer satisfaction are
inextricably linked.

Unit-1 Concepts in Service Marketing 29

The Gaps Model of Service Quality
The customer gap
 The provider gaps
 Gap 1. Not knowing what customers
expect
 Gap 2.Not selecting the right service
designs and standards
 Gap 3.Not delivering to service standards
 Gap 4.Not matching performance to
promises

Unit-1 Concepts in Service Marketing 30

The Gaps Model of Service Quality
Expected service

Perceived service
Gap 4
Gap1 Gap3
Service delivery External
communication

ServiceGap
design
2&
standards

Company perception of
consumer expectation

Unit-1 Concepts in Service Marketing 31

 Services Quality Dimensions
a) Technical dimensions are the ‘what’ or the
instrumental dimensions of service delivery.
b) Functional dimensions are the ‘how’ dimensions of
service delivery.
c) Tangible dimensions relate to the more concrete
evidence of a service actually taking place.
d) Intangible dimensions are usually the core aspects of
the service, the actual process, deed, act,
performance central to the service delivery.
e) Physical facilities and ‘service- scapes’ refer to the
immediate environment where a service activity
takes place.
Unit-1 Concepts in Service Marketing 32
Services Quality Dimensions
f) Reliability entails the consistency of service
performance and dependability.
g) Responsiveness concerns the willingness and readiness
of staff to deliver the service and respond to customers’
requirements.
h) Competence refers to the ability of the service company
to actually deliver the service.
i) Credibility concerns the trustworthiness, believability
and honesty experienced during the service encounter.
j) Empathy and understanding the customer is one of the
most intangible dimensions in practice.
k) Image is the mental representation of reality sustained
by an individual or group.

Unit-1 Concepts in Service Marketing 33

 Thank You !!!

Unit-1 Concepts in Service Marketing 34