Services MarketingBy Himanshu Upadhyay

MBA/BBA-Specialization

MBM3/BBM2

“There are no such thing as service industries. There are only

industries whose service components are greater or less than those of other industries.

Everybody is in service.”

-Theodore Levitt-

What is service?

It is the part of the product or the full product for which the customer is willing to see value and pay for it.

What is 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 transitory, often intangible in nature, and does not normally result in ownership of any of the factors of production”.

What is service? “A service is an economic activity that

creates value and provides benefits for customers at specific times and places by bringing about a desired change in, or on behalf of, the recipient of the service”.

Characteristics of Services1. Intangibility

-Services can not be tasted, felt, heard or smelt.

-Intangibility creates a feeling of uncertainty.

-Example: Banking services, Parlor.

The process of a company making a service tangible should include:

a. Location and Physical Setting

-Accessible, -Planned traffic flow, -Short waiting lines, -Attractive exterior

design.

Characteristics of Services Cont..

b. Employees and Agents

-Sufficient in No., -Neat appearance, Sharpness and Knowledge.

c. Hardware, Tools and Techniques

-Latest hardware

d. Communication

-Speedy

Characteristics of Services Cont..2. Inseparability

-Services can not be separated from the service providers.

-Inseparability creates problems in case of market expansion.

-Example: Banking services, Doctors and Patients, Waiter and

Consumers

Characteristics of Services Cont..3. Variability/ Heterogeneity

-Services are highly variable.

-Problem in standardizing.

Example: Experience of bus travelers, Receptionist.

4. Perishability

-Services can not be stored.

-Creates problem when demand fluctuate.

Example: Train that leaves the Railway station

Characteristics of Services Cont..5. Customer Participation

-Service production is not a one-sided activity.

Example: Medical treatment, Hair dressing, Health clubs, Colleges, Beauty

care centres.

6. No Ownership

Marketing Problems/Challenges and Strategic OptionsService Characteristic: IntangibilityMarketing Problems:• Can not be communicated easily.• Consumer suspects due to absence of concrete

evidences.• Design of total service package not possible.• Comparative presentation is not possible.

Marketing Problems/Challenges and Strategic Options Cont..Strategic Options:• Making the service process tangible to the

maximum possible extent.• Managing and promoting word-of-mouth

communication.• Strengthening internal and external

marketing.• Use of relationship marketing.

Marketing Problems/Challenges and Strategic Options Cont..Service Characteristic: InseparabilityMarketing Problems:• Problems of market expansion.• Maintenance of service quality.• Compulsory presence of consumers.• Limited production capacity.• Operation at limited capacity.

Marketing Problems/Challenges and Strategic Options Cont..Strategic Options:• Minimization of customer interactions.• Innovating techniques of indirect interaction.• Standardization to the maximum possible

extent.• Developing distribution network with quality

control mechanisms.

Marketing Problems/Challenges and Strategic Options Cont..Service Characteristic: VariabilityMarketing Problems:• Limited scope for standardization.• Not possible to communicate exactly what the

consumer is going to receive.• Quality can be determined only after the

service is consumed.

Marketing Problems/Challenges and Strategic Options Cont..Strategic Options:• More focus on standardization.• Internal marketing and employee training.• Positioning variation as a strength of

innovation.• Promote research and innovations.

Marketing Problems/Challenges and Strategic Options Cont..Service Characteristic: PerishabilityMarketing Problems:• Storage of service is not possible.• Sales volume continuously in relation to

the capacity.• Time pressure in sales.

Marketing Problems/Challenges and Strategic Options Cont..Strategic Options:• Demand management.• Capacity management.• Tactical management.• Continuous study on demand patterns and

competitive parameters.

Marketing Problems/Challenges and Strategic Options Cont..Service Characteristic: Customer ParticipationMarketing Problems:• Customers are not controllable.• Production quality also depends upon

customer’s knowledge and ability to participate.

• Customers are evaluating at every stage of service production.

Marketing Problems/Challenges and Strategic Options Cont..Strategic Options:• Effective external marketing.• Customer education and training.• Effective interactive marketing.• Management of movements of truth.• Effective internal marketing.

Marketing Problems/Challenges and Strategic Options Cont..Service Characteristic: No OwnershipMarketing Problems:• Nothing remains after consumption.• Very less time to the consumer to evaluate

the product.• High consumer dissonance.

Marketing Problems/Challenges and Strategic Options Cont..Strategic Options:• Making communication tangible.• Customer relationship marketing.• Managing high level of company image.

Difference between physical goods and servicesPhysical goods Services

Physical goods are tangible Services are intangible

When a good is purchased, there is something that can be seen, touched, perhaps smelled or worn

Services can not be seen, felt, heard or smelt before they are bought

Goods are consumed, used and possessed. It is easy for the seller to demonstrate or display the goods

Services are availed but not possessed, therefore the absence of tangible features means that it is difficult for the seller to demonstrate or display services and for buyers to sample, test or make a thorough evaluation

In goods customers do not participate in the production process

In service customers participate in production process

Difference between physical goods and servicesPhysical goods Services

In goods core value processed in factory In service core value produced in the buyer-seller interaction

In physical goods production and distribution are separated from consumption

In services production, distribution and consumption are simultaneous processes

Physical goods can be kept in stock Services cannot be kept in stock

Firm is able to store or transport physical goods

Firm is unable to store or transport services, only direct distribution is possible

Physical good is an object, a device, a thing

Service is a deed, a performance, an activity or process, an effort.

Difference between physical goods and servicesPhysical goods Services

Transfer of ownership possible in goods No transfer of ownership in services.

Physical goods are homogeneous Services are heterogeneous

It is possible to offer consistency and uniformity of physical goods.

Often impossible to assure consistency in the services provided by a seller or to standardize offerings among sellers of the same service