Introduction to service marketing

SERVICE MARKETING: AN INTRODUCTION
TEACHING NOTES ON SERVICE MARKETING
BY
C P RIJAL
PhD, MPhil, MBA
PROFESSOR OF MANAGEMENT SCIENCES
CHIEF ACADEMIC ADVISOR
NEPAL COLLEGE OF MANAGEMENT
KATHMANDU UNIVERSITY, SCHOOL OF MANAGEMENT
July 29, 2015 1rijalcpr@gmail.com

UNIT 1: INTRODUCTION
1. Concept of Service Marketing
2. Development of Service Marketing
3. Differentiating Goods and Service Marketing
4. Challenges for Service Marketers
5. Triangle of Service Marketing
6. Service Marketing Mix

1. Concept of Service Marketing
 For building up our basic understanding about
service marketing, we should consider at least three
things – defining services, defining service
marketing, and recognizing the main marketable
service entities.
 So, let’s focus on understanding the basic concepts
on service, service marketing and main marketable
service entities.

Defining Service …
 Simply speaking, service is the way how a provider or
producer acts by means of its deeds, processes or
performances so as to satisfy the expectations,
deprivations, motivations and unmet needs of the receivers
of the outputs of such deeds, processes or performances.
 Facebook provides with social networking features, The
British Airways offers with worldclass flight experiences,
Norvic Hospital offers quality healthcare solutions in
Nepal. These all are a few examples of services.
 The quality of such services relies on effectiveness of the
actions of the provider – the deeds, the way they are
produced – processes, and the effects they generate on
experiencing or consuming them – performances.

Defining Service …
 A service may be referred to as an intangible and more
perishable component of any business offering – absolute
package as a core product or as an augmented form to
promote the tangible products.
 Normally, the production and consumption of services
takes place simultaneously.
 The purpose of creating such may be business as well as
purely service to the society.
 There is big difference between the services offered by
‘service not for profit’ organizations and ‘service at a cost’
organizations.
 Let’s consider ‘service at a cost’ proposition in business.

Defining Service Marketing …
 The overall approach of generating awareness, interest,
desire and action (AIDA) to consume services that are put
on offer of the provider may be referred to as service
marketing.
 Communication of the core meaning, benefits, and
procedures of consumption of a service; making it
convenient for the reach of target customers; building a
sound in-bound and outbound logistics support system;
selection, development and promotion of an effective
service distribution network; and developing and
promoting systems visibility are a few integrated functions
related to marketing of services.

Defining Service Marketing …
 Ordinarily, ‘service marketing’ can be linked to the overall
approach adopted by a firm to promote the service
component of its offering – no matter whether it is a core
offering or augmented one.
 The key functions related to marketing of services will
include branding and packaging of services, performing
advertising and publicity about the services on offer,
promoting the business partners that leverage marketing
and promotion of services across the markets, assessing the
service impact and customer satisfaction, and so on – as it
applies to marketing of tangible goods.
 In other words, service marketing refers to the overall
approach of promoting the marketable service entities.

Main Marketable Entities
Can you justify with examples how these elements can
serve as marketing entities?
1. Goods or commodities
2. Services
3. Ideas
4. Events
5. Places
6. Persons
7. Information
8. Properties
9. Experiences
10.Know-how
Better, differentiate
these in respect with --
a. tangibility,
b. perishability,
c. transfer of ownership,
d. heterogeneity, and
e. timing of production
and consumption?

Implications of Intangibility
 Services cannot be inventoried.
 Services cannot be patented.
 Services cannot be readily displayed or
communicated.
 Pricing is difficult.
 Services cannot be physically handed over
the buyer after transaction.
 There will remain a long-term debate over
the ownership of services as they cannot be
fully separated from their maker.

Implications of Heterogeneity
Service delivery and customer satisfaction depend
on employee actions.
Service quality depends on many uncontrollable
factors.
There is no sure knowledge that the service
delivered matches what was planned and
promoted.
Quality of delivered services will vary from person
to person delivering it.
Different customers will have varying level of
perception on delivered service quality.

Implications of Simultaneous Production and
Consumption
Customers participate in the process and affect the
transaction.
Customers affect each other, a less satisfied
customer may affect adversely to a greater extent.
Employees affect greatly the service outcomes.
Mass production of services is quite difficult.
If not consumed immediately, many services turn
into big cost to the firm.

Implications of Perishability
 It is difficult to synchronize supply and demand of
services.
 Services cannot be returned or resold.
 They cannot be stocked for future sale or use.
 Opportunity cost is always unpredictable.

Value Added by Physical, Intangible Elements Helps Distinguish
Goods and Services

Tangibility Spectrum
Tangible
Dominant
Intangible
Dominant
Salt
Soft Drinks
Detergents
Automobiles
Cosmetics
Advertising
Agencies
Airlines
Investment
Management
Consulting
Teaching
Fast-food
Outlets
Fast-food
Outlets













More Examples of Services and Service Industry
1. Health Care: hospital, medical practice, dentistry, etc.
2. Professional Services: accounting, legal, architectural, research and
innovation, consulting, management contracts, etc.
3. Financial Services: banking, investment advising, insurance, etc.
4. Hospitality: restaurant, hotel/motel, bed and breakfast, ski, etc.
5. Travel: airlines, travel agencies, theme park, etc.
6. Public Service: national security, defense, general admin., etc.
7. Social Service: politics, economic development, NGO/INGO, etc.
8. Education: education, counseling, coaching, teaching, etc.
9. Others: hair style, pest control, plumbing, lawn maintenance,
counseling services, health club, etc.

2. Development of Service Marketing
What resulted in evolution of services?
1. Evolution of human being as a social entity required
services of others for living better lives.
2. The financial prosperity and well-being of people made it
realize the need of special services in which they could
spend their disposable money.
3. Changing behavior and values of people forced them
realize the need of services.
4. Felt importance of spending some portion of life in
pleasure, entertainment and leisure resulted evolution of
services as alternatives to it.
5. A range of survival needs also resulted in evolution of
services.

What resulted in evolution of services?
6. To facilitate the challenges of material developments, it
required a number of services.
7. Various new inventions required to be attached with a
number of services.
8. More service sectors evolved to create jobs, empowerment
and employment as part of government and social
development missions.
9. Due to more educated and aware people, they got realized a
number of services required.
10.To meet the ever-increasing and ever-evolving unmet needs
of the human beings.

Additional Reasons of Growth of Services
1. Evolution of service-based economies
2. Economic changes
3. Service as a business imperative in manufacturing and
IT
4. Increasing needs of professional services, especially in
hospitality, research and innovation
5. Industrial deregulation; political legal changes; policy
changes
6. Globalization
7. Socio-demographic changes
8. Technological changes

A Few Evolutionary Landmarks of Services
Phase I: Argumentation (Prior to 1980s)
Phase II: Foundation Phase (1980 – 1985)
Phase III: Independent Phase (1986 onwards)
1. Can you explain what happened during these
phases? And why these phases are called
argumentation, foundation and independent?
2. Also discuss how the need of marketing of services
evolved as one of the core marketing concepts.

3. Differentiating Goods and Service Marketing
Let’s compare it from at least five perspectives…
Marketing of
Goods
Basis of
comparison
Marketing of
Services
?
1. Tangibility ?
?
2. Perishability ?
?
3. Timing of
production and
consumption
?
?
4. Separating from
its creator
?
?
5. Heterogeneity of
offered quality
?

4. Challenges for Service Marketers
1. Since the services are intangible, it is quite difficult to
define and improve their quality.
2. Communicating and testing new services is always
complicated as they do not have any tangible form.
3. Communicating and maintaining a consistent image is
always a tough task.
4. Motivating and sustaining employee commitment to serve
the best is a highly complicated task.
5. Coordinating marketing, operations and human resource
efforts for best service delivery is another challenge.
6. Setting prices of services is very much difficult job.
7. Standardization and customization of services is difficult.

5. Triangle of Service Marketing
 It is a tri-logical concept advocating that
effectiveness of service delivery relies on three
integral elements – company that offers of owns
services, customers for whom the services are
targeted to, and the employees responsible for the
delivery of services.
 It all talks about how the company, its employees
and customers can work collectively for setting,
enabling and delivering the promises more
effectively.

The Services Marketing Triangle
Interactive Marketing
Company
(Management)
CustomersEmployees
enabling the promise
delivering the promise
setting the promise

Company or Management
Customers or UsersEmployees or Providers
Technology
The Services Triangle and Technology
Technology connects all the agencies responsible in it.

Ways to Use the Services Marketing Triangle
Overall Strategic
Assessment
1. How is the service
organization doing on all
three sides of the
triangle?
2. Where are the
weaknesses?
3. What are the strengths?
Specific Service
Implementation
1. What is being promoted
and by whom?
2. How will it be delivered
and by whom?
3. Are the supporting systems
in place to deliver the
promised service?

6. Service Marketing Mix
 Product, price, place and promotion decisions are
referred to as traditional elements of marketing
mix.
 Service marketing mix goes three steps further as it
incorporates additional three elements including
people, physical evidence and processes involved
in production and consumption of services.

7 Ps in Service Marketing
1. Product
2. Price
3. Place
4. Promotion
5. People
6. Process
7. Physical Evidence
Building Customer
Relationships
Through People,
Processes, and
Physical Evidence

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

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
Expanded Marketing Mix for Services

Ways to Use the 7 Ps
Overall Strategic
Assessment
1. How effective is a firm’s
services marketing mix?
2. Is the mix well-aligned with
overall vision and strategy?
3. What are the strengths and
weaknesses in terms of the
7 Ps?
Specific Service
Implementation
1. Who is the customer?
2. What is the service?
3. How effectively does the
services marketing mix for a
service communicate its
benefits and quality?
4. What changes or
improvements are needed?

Introduction to service marketing

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