1. MARKETING OF SERVICES
MBA M&S III SEMESTER

2. MODULE
I
Understanding Services and Consumer Behaviour

3. SERVICE SECTOR & ITS STRUCTURE
WHAT ARE SERVICES?
“ Services are deeds, processes, and performances.”
Example IBM offers repair and maintenance service for its equipment, consulting
services for IT and e-commerce applications, training services, Web
Design and hosting, and other services.
These services may include a final, tangible report, a website, or in the
case of training , tangible instructional materials.
For the most part, the entire service is represented to the client through
problem analysis activities, meetings with the client, follow-up calls, and
reporting- a series of deeds, processes, and performances.
** Similarly, the core offerings of hospitals, hotels, banks, and utilities
comprise primarily deeds and actions performed for customers

4. Definition“ All economic activities whose output is not a physical product or
construction, is generally consumed at the time it is produced, and
provides
added
value
in
forms
(such
as
convenience, amusement, timeliness, comfort, or health) that are
essentially intangible concerns of its first purchaser.”

5. Services are Different


GOODS
SERVICES
RESULTING IMPLICATIONS
Tangible
Intangible
Services cannot be
inventoried, Services
cannot be
displayed, communicated
Standardized
Heterogeneous Each time experience differs
Service quality depends on
many uncontrollable factors
Production separate Simultaneous production Customer participate in
from Consumption and consumption
and effect the transaction
Mass production is difficult
 Perishable
Nonperishable
Services can not be resold,
 Right of ownership No ownership
returned or stored
Cannot be owned


7. SERVICE SECTOR IN INDIA





The Services Sector contributes the most to the Indian GDP.
The Sector of Services in India has the biggest share in the
country's GDP, it accounts for more than 50% contribution.
The various sectors under the Services Sector in India are
construction, trade, hotels, transport, restaurant, communicati
on
and
storage,
social
and
personal
services, community, insurance, financing, business, services,
and real estate.
Services marketing concepts and strategies have developed in
response to the tremendous growth of service industries.
Most new employment is provided by services.
Strongest growth area for marketing.

8. Deregulation and Services Marketing
 Specific demand for services marketing concepts has come
from deregulated industries and professional services.
 Deregulatory moves by governments have affected service
industries such as airlines, banking, and telecommunications.
 As a result, marketing decisions that used to be tightly
controlled by government are now partially, and sometimes
totally, within the control of individual firms

17. Drivers Of Service Sector Growth
Technology
 Globalization
 Market Deregulation
 Customization
 Digitalization
 Connectivity
 Industry Convergence
 New types of intermediaries


18. 10 Keys to Successfully Competing In the New Economy
 Be customer oriented
 Excel in process management
 Designing winning value propositions
 Providing outstanding customer service
 Offer innovative and high quality products
 Forge strong relationships with collaborators and customers
 Stress Retention Marketing (RM) –keeping & growing
accounts
 Seek ways to continually add value for customers
 Understand the changing nature of Global Business
Environment
 Have a long-term management perspective

19. NATURE OF SERVICES- TANGIBILITY SPECTRUM
Intangibility
 Inseparability
 Variability
 Perishability

Tangibility Perspective
Services tend to be more intangible than manufactured
products, and manufactured products tend to be more tangible
than services. For example, the fast-food industry, while
classified as a service, also has many tangible components
such as the food, the packaging, and so on.”

21. Inseparability



Typically produced, consumed and evaluated simultaneously.
If the availability of Service-producers are constrained
- Use pricing to reduce demand
- Increase service efficiency
-Serving multiple customers simultaneously
- Increase speed of service providing
Focus efforts on training of front staff for better service
evaluation .

22. 


Variability
Service quality depends heavily on the person providing
them.
How to secure service quality
- Good hiring and training procedures
- Identify customer service evaluation criteria
- Standardized the service- performance process
Monitor customer satisfaction

23. Perishability
 Services can not be stored.
 Vulnerable to fluctuations in demand.
Demand Side
Supply Side
Differential Pricing
Part-time employees
Nonpeak Demand
Peak-time efficiency
Complementary Services
Increased consumer
participation
Reservation Systems
Shared Services
Facilities for future
expansion

27. FLOWER OF SERVICE
Dozens of supplementary services can be classified into one of the following
eight clusters.
FACILITATING SERVICES
Information
Order Taking
Billing
Payment
ENHANCING SERVICES
Consultation
Hospitality
Safekeeping
Exceptions

29. FACILITATING ELEMENTS
INFORMATION
Examples of Information elements
Directions to service sites
Schedules/service hours
Prices
Instructions on using core product/supplementary services
Reminders
Warnings
Conditions of sale/service
Notification of changes
Documentation
Confirmation of reservations
Summaries of account activity
Receipts and tickets

30. ORDER-TAKING ELEMENTS
APPLICATIONS
 Membership in clubs or programs
 Subscription services(e.g. utilities)
 Prerequisite-based services(e.g. financial credit, college enrollment)
ORDER ENTRY
 On-site order fulfillment
 Mail/telephone order placement
 E-mail/Website order placement
RESERVATIONS AND CHECK-IN
 Seats
 Tables
 Rooms
 Vehicles or equipment rental
 Professional appointments
 Admission to restricted facilities (e.g. museums, aquariums)

31. BILLING ELEMENTS
Periodic statements of account activity
Invoices for individual transactions
Verbal statements of amount due
Machine display of amount due
Self-billing (computed by customer)
PAYMENT ELEMENTS
Self-service
Direct To Payee Or Intermediary
Exact change in machine
Cash handling & change giving
Cash in machine with change Check handling
returned
Insert prepayment card
Credit/charge/debit card handling
Insert token
Coupon redemption
Electronics funds transfer
Tokens, vouchers etc.
Mail a check
Enter credit card number online

32. Automatic deductions from Financial Deposits (e.g. bank charges)
Control & Verification
Automated systems (e.g. machine-readable tickets that operate gates)
Human systems (e.g. toll collectors, tickets inspectors)
ENHANCING SERVICES
CONSULTATION SERVICES
Advice
Auditing
Personal counseling
Tutoring/training in product use
Management or technical consulting
HOSPITALITY ELEMENTS
Greeting
Food & Beverages
Toilets & washrooms
Waiting Facilities and amenities- Lunges, waiting areas, seating, weather
protection, magazines, entertainment, newspapers
Transport
Security

33. SAFEKEEPING ELEMENTS
Caring for Possessions Customers Bring with them
Child Care
Pet Care
Parking facilities for vehicles
Valet parking
Coatrooms
Luggage handling
Storage space
Safe deposit boxes
Security personnel
Caring for Goods Purchased (or Rented) by customers
Packaging
Transportation
Delivery
Installation
Inspection & diagnosis
Cleaning
Refueling
Preventive maintenance
Repairs & renovation
Upgrade

34. EXCEPTIONS ELEMENTS
Special Requests in Advance of Service Delivery
Children’s needs
Dietary requirements
Medical or disability needs
Religious observances
Deviations from standard operating procedures
Handling Special Communications
Complaints
Compliments
Suggestions
Problem solving
Warranties & guarantees against product malfunction
Resolving difficulties caused by accidents , service failures, and problems
with staff or other customers
Assisting customers who have suffer an accident or medical emergency

35. CATEGORIZING SERVICE PROCESSES
What is the nature of service
act
TANGIBLE ACTIONS
Who or what is the direct recipient of the
PEOPLE
POSSESSIONS
People Processing Possession Processing
INTANGIBLE ACTIONS
Mental stimulus
processing
Information processing

36. PEOPLE PROCESSING
Customers need to ne physically present.
Customers must be prepared to spend time co-operating with service
providers.
Strategy- Design simple processes in service factory
Design services cape around the customer
Customize as far as possible
Enhance the experience for repurchase
People’s
Bodies
Tangible
Actions
Beauty Salons
Passenger
Transports
Health care
Gyms
Restaurants
Shopping

37. MENTAL STIMULUS PROCESSING
Services that interact with people's mind include education, news and
information.
Strategy- Easy on the mind of the consumer
Add tangible clues
Feedbacks & follow ups
People’s Mind
Intangible
Actions
Education
Broadcasting
Museum
Theatre

38. POSSESSION PROCESSING
 Physical treatment to customers belongings
 Production and consumption are often not simultaneous ~ quasimanufacturing
 Customers are less physically involved
Drop off and pick up
Service factory may have to go to the customer
Strategy – Problem must be solved with some tangible enhancement
Accompanied with a convenient service
Service Guaranteed
People’s Tangible
Possession
Tangible
Actions
Freight Transport
Auto Repairs
Laundry & Dry Cleaning
Tailoring
Veterinary care

39. 



INFORMATION PROCESSING
Most intangible form of service output but may be transformed into more
tangible forms
Customer involvement may be fairly limited
Face to face contact is not strictly necessary but often desirable
Relationships and trust are important
Strategy - Intensive use of IT “Anywhere, anytime”
New service features through websites, email, internet
More opportunities for self service.
People’s Intangible Assets
Intangible
actions
Banking
Insurance
Legal services
Accounting

40. SELF SERVICE TECHNOLOGIES

Ultimate form of customer involvement
◦ Customers undertake specific activities using facilities or systems
provided by service supplier
◦ Customer’s time and effort replace those of employees
e.g. Internet-based services, ATMs, self-service gasoline pumps

Information-based services can easily be offered using SSTs
◦ Used in both supplementary services and delivery of core product
e.g. eBay – no human auctioneer needed between sellers and buyers

Many companies seek to encourage customers to serve themselves using
Internet-based self-service
◦ Challenge: getting customers to try this technology

41. PSYCHOLOGICAL FACTORS RELATED TO THE USE OF SSTS

SSTs advantages
◦ Time savings
◦ Cost savings
◦ Flexibility
◦ Convenience of location
◦ Greater control over service delivery
◦ High perceived level of customization

SSTs disadvantages
◦ Anxiety and stress experienced by customers who are uncomfortable
with using them
◦ Some see service encounters as social experiences and prefer to deal
with people

42. CONSUMER BEHAVIOUR IN SERVICES
 Search
Qualities
attributes a consumer can determine prior to purchase of a
product
 Experience Qualities
attributes a consumer can determine only after purchase or
during consumption of a product
 Credence Qualities
characteristics that may be impossible to evaluate even
after purchase and consumption

43. Continuum of Evaluation for Different
Types of Products
Most
Goods
Easy to evaluate
Most
Services
Difficult to evaluate
High in search
qualities
High in experience High in credence
qualities
qualities

44. SERVICE ENCOUNTERS & TYPES
A service encounter is a period of time during which customer interact
directly with a service. It is also called as "MOT”.
The heart of a service is the encounter between the server and the
customer.
It is here where emotions meet economics in real time and where most
people judge the quality of service.
TYPES OF SERVICE ENCOUNTERS
REMOTE ENCOUNTERS
 Encounters can occur without any direct human contact , such as, when a
customer interacts with a bank through the ATM system.
 It also occur when the firm sends its billing statements or communicates
other types of information to customers by mail.
 Tangible evidence of the service and the quality of the technical processes
and systems become the primary bases for judging quality.

45. PHONE ENCOUNTERS
 In many organizations ( such as insurance companies, utilities, &
telecommunications) , the most frequent type of encounter between an
end customer and the firm occurs over the telephone.
 Tone of voice, employee knowledge, and the effectiveness/efficiency in
handling customer issue become important criteria for judging quality in
these encounters.
FACE-TO-FACE ENCOUNTERS
 This type of encounter occurs between an employee and a customer in
direct contact.
For example- IBM, in a business-to-business setting direct encounters
occur between the business customer and salespeople.
 Both verbal and non-verbal behaviour are important determinants of
quality, as are tangible cues such as employee dress and other symbols of
service(equipment, informational brochures, physical setting).

47. A Service Encounter Cascade for a Hotel Visit
Check-In
Bellboy Takes to Room
Restaurant Meal
Request Wake-Up Call
Checkout

48. EXPANDED SERVICE MIX
Product
 Price
 Place
 Promotion
 People
 Process
 Physical Evidence


49. PRODUCT
PLACE
PROMOTION PRICE
Physical good Channel type
features
Promotion
blend
Flexibility
Quality level
Exposure
Salespeople
Price level
Accessories
Intermediaries
Advertising
Terms
Packaging
Warranties
Outlet location Sales
promotion
Transportation Publicity
Product lines
Storage
Branding
Differentiation
Allowances

50. PEOPLE
PHYSICAL
EVIDENCE
PROCESS
Employees
Facility design
Flow of activities
Customers
Equipment
Number of steps
Communicating
culture and values
Signage
Level of customer
involvement
Employee research
Employee dress
Other tangibles

51. MODULE II
FOCUS ON CUSTOMERS

52. Possible Levels of Customer
Expectations

53. Dual customer expectations levels and the
Zone of Tolerance
Desired Service
Zone of
Tolerance
Adequate Service

54. Zones of Tolerance for Different
Service Dimensions
Desired Service
Level
of
Expectation
Zone
of
Tolerance
Desired Service
Adequate Service
Zone
of
Tolerance
Adequate Service
Reliability
Tangibles

55. Factors That Influence Desired Service
Lasting Service
Intensifiers
Desired Service
Personal Needs
Zone
of
Tolerance
Adequate Service

56. Factors That Influence Adequate Service
Temporary Service
Intensifiers
Desired Service
Perceived Service
Alternatives
Self-Perceived
Service Role
Situational
Factors
Zone
of
Tolerance
Adequate Service
Predicted
Service

57. Factors That Influence Desired and Predicted
Service
Explicit Service
Promises
Implicit Service
Promises
Word-of-Mouth
Desired Service
Zone
of
Tolerance
Adequate Service
Past Experience
Predicted
Service

58. ZONE OF TOLERANCE



Services are heterogeneous i.e. performance may vary across
providers, across employees of same provider.
The extent to which customer recognize and are willing to
accept this variation is called Zone of tolerance
It is the range where customers do not particularly notice
service performance Service Marketers can influence:

59. CUSTOMER PERCEPTIONS IN SERVICE




Factors which influence consumers’ perceptions
Factors which influence satisfaction
Dimensions of service quality
Service encounters

60. Customer Perceptions of Quality and Customer
Satisfaction

61. Factors Influencing Customer Perception
 Product/service quality



Specific product or service features
Consumer emotions
Attributions for service success or failure

62. Factors Influencing Customer Satisfaction




Perceptions of equity or fairness
Other consumers, family members, and coworkers
Price
Personal factors
◦ the customer’s mood or emotional state
◦ situational factors

63. Outcomes of Customer Satisfaction
 Increased customer retention


Positive word-of-mouth communications
Increased revenues

64. SERVICE QUALITY
customer’s judgment of overall excellence of the service
provided in relation to the quality that was expected.
 Service quality assessments are formed on judgments of:
◦ outcome quality
◦ interaction quality
◦ physical environment quality
 The

65. The SERVQUAL dimensions – Perceived Service
Quality
Reliability (dependability, accurate performance)
 Assurance (competence, courtesy, credibility & security)
 Tangibles (appearance of physical elements)
 Empathy (easy access, good communications & customer
understanding)
 Responsiveness (promptness & helpfulness)


66. The Five Dimensions of Service Quality
Reliability
Assurance
Tangibles
Ability to perform the promised service
dependably and accurately.
Knowledge and courtesy of employees
and their ability to inspire trust and
confidence.
Physical facilities, equipment, and
appearance of personnel.
Empathy
Caring, individualized attention the firm
provides its customers.
Responsiveness
Willingness to help customers and
provide prompt service.

67. RELIABILITY
Providing service as promised
Dependability in handling customers’
service problems
Performing services right the first time
Providing services at the promised time
Maintaining error-free records





SERVQUAL Attributes
EMPATHY



RESPONSIVENESS




Keeping customers informed as to when
services will be performed
Prompt service to customers
Willingness to help customers
Readiness to respond to customers’
requests
ASSURANCE




Employees who instill confidence in customers
Making customers feel safe in their transactions
Employees who are consistently courteous
Employees who have the knowledge to answer
customer questions


Giving customers individual attention
Employees who deal with customers in a caring
fashion
Having the customer’s best interest at heart
Employees who understand the needs of their
customers
Convenient business hours
TANGIBLES




Modern equipment
Visually appealing facilities
Employees who have a neat, professional
appearance
Visually appealing materials associated with
the service

68. IMPACT OF SERVICE FAILURES AND RECOVERY
Service Failure occurs when service performance that falls
below a customer’s expectations in such a way that leads to
customer dissatisfaction.
 Service Recovery refers to the actions taken by an
organization in response to a service failures.
 Failures occur for all kind of reasons
-the service may be unavailable when promised
-it may be delivered late or too slowly
-the outcome may be incorrect or poorly executed
-employees may be rude or uncaring


70. Customer Complaint Actions Following
Service Failure

71. TYPES OF COMPLAINERS


Passives: least likely to take any action, say anything to the
provider, spread negative WOM, or complain to a third party;
doubtful of the effectiveness of complaining
Voicers: actively complain to the provider, but not likely to
spread negative WOM; believe in the positive consequences
of complaining - the service provider’s best friends!

72. 

Irates: more likely to engage in negative WOM to friends
and relatives and to switch providers; average in complaints
to provider; unlikely to complain to third parties; more angry,
less likely to give provider a second chance
Activists: above average propensity to complain on all levels;
more likely to complain to a third party; feel most alienated
from the marketplace compared to other groups; in extreme
cases can become “terrorists”

73. Service Recovery Strategies

74. Fixing the Customer

When customers take the time to complain, they
generally have high expectations.
◦ They expect the company to respond quickly and to be
accountable.
◦ They expect to be compensated for their grief and for
the hassle of being inconvenienced.
◦ They expect to be treated nicely in the process!

75. Treat Customers Fairly



Outcome Fairness
◦ Outcome (compensation) should match the customer’s level
of dissatisfaction; equality with what other customers
receive; choices
Procedural Fairness
◦ Fairness in terms of policies, rules, timeliness of the
complaint process; clarity, speed, no hassles; also choices:
“What can we do to compensate you…?”
Interactional Fairness
◦ Politeness, care, and honesty on the part of the company
and its employees; rude behavior on the part of employees
may be due to lack of training and empowerment

76. Fixing the Problem



After “fixing the customer” the company should address the
actual problem that created the poor service delivery in the
first place.
If the problem is likely to recur for other customers, then the
service delivery process may need to be fixed, too.
Strategies for fixing the problem include encouraging and
tracking complaints, learning from recovery experiences
and from lost customers, and making the service fail-safe.

77. Service Guarantees

Guarantee = an assurance of the fulfillment of a condition
(Webster’s Dictionary)

In a business context, a guarantee is a pledge or assurance that
a product offered by a firm will perform as promised and, if
not, then some form of reparation will be undertaken by the
firm

For tangible products, a guarantee is often done in the form of
a warranty

Services are often not guaranteed
◦ Cannot return the service
◦ Service experience is intangible (so what do you guarantee?)

78. Characteristics of an Effective Service Guarantee




Unconditional
◦ The guarantee should make its promise unconditionally – no strings
attached
Meaningful
◦ The firm should guarantee elements of the service that are important
to the customer
◦ The payout should cover fully the customer’s dissatisfaction
Easy to Understand
◦ Customers need to understand what to expect
◦ Employees need to understand what to do
Easy to Invoke
◦ The firm should eliminate hoops or red tape in the way of accessing or
collecting on the guarantee

79. Benefits of Service Guarantees
A good guarantee forces the company to focus on its
customers.
 An effective guarantee sets clear standards for the
organization.
 A good guarantee generates immediate and relevant feedback
from customers.
 When the guarantee is invoked there is an instant opportunity
to recover.
 Information generated through the guarantee can be tracked
and integrated into continuous improvement efforts.
 A service guarantee reduces customers’ sense of risk and
builds confidence in the organization.


80. When to Use (or Not Use) a Guarantee

Reasons companies might NOT want to offer a service
guarantee:
◦ Existing service quality is poor
◦ A guarantee does not fit the company’s image
◦ Service quality is truly uncontrollable
◦ Potential exists for customer abuse of the guarantee
◦ Costs of the guarantee outweigh the benefits
◦ Customers perceive little risk in the service

81. Causes Behind Service
Switching