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2. Philip Kotler: “Service is any activities or benefits that one party can offer to
another that is essentially intangible and does not result in ownership of
anything its production may or may not be tied to a physical product”.
Service innovation
[2] Contribution to GDP: SS also contributes significantly to GDP. This can be seen as
below
Rank Country Percentage
1 USA 80
2 Japan 78
3 France 78
4 UK 73
5 Germany 72
It can be seen that SS contributes more than 70% to GDP. In USA it is 80% besided
there are many countries in the world of which get more than 60% GDP from SS.
[2] Contribution to GDP: In India at one time prime sector contributes maximum to
GDP but today service sector contributes maximum (59%)this can be seen as below:
[3] Contribution to Exports: India is one of the leading service sector exporter. India
achived 10th rank in service sector exports globally its rank in merchandise export is
20th in the world. India’s service sector share in the world exports increased from 2.6%
in 2009 to 3% in 2010. Though India has surplus on capital account. It has helped
India to overcome its BOP problem.
[4] Higher Standard of Living: Because of higher GDI growth, higher employment,
exports, income the service sector has contribute to higher standard of living.
CHARACTERISTICS OF SERVICES
[2] Perishable: Services are perishable in the sense that services cannot be stored foe
later sale or use. If a particular work is not done in time that time is lost forever. Unused
or underused services are economic waste. For example vacant room in a five star
hotel, few audiences for a particular show such revenue is lost.
[3] Inseparable: services are inseparable means that services cannot be separated
from their providers whether the providers are people or machine. For eg, doctor has
to be physically present for an operation. If a service employee provides the service.
Then the employee becomes part of the service. According to Donald Cowell, “Goods
are produced, sold & then consumed whereas the services are sold & then produced
& then consumed”.
[5] Ownership: The ownership of service is not transferable. The user has only access
to the service.
[8] Nature of Demand: Services are of fluctuating nature. For example: In hotel there
is heavy rush during weekend and less customer during working days. Thus the
important challenge for service marketers to match demand to capacity.
CLASSIFICATION OF SERVICES
a) On the basis of end user: Services on the basis of end user can be
classified as:
Services provided to individual
Individual Hair cutting
1 consumer
Consumer Personal loan
It has mass market
MTDC takes
Business To One Business unit provides services
2 services of
Business to another unit
TCS
ONGC
3 Industrial User End User is plants and factories requires drilling
services
[3] On the basis of customer contact involved: Services can also be classified on the
basis of customer contact involved. Service provider may have high or low contact in
providing services. For example - teaching involves high contact and it is people based
while insurance involve low contact and it is things based.
[4] On the basis of degree of exercise of expertise: Services can also be classified on
the basis of degree of expertise needed for service transaction such as :
a) Highly professional services example Doctors, Lawyers, teachers.
b) Nonprofessional services Ex Cobbler, mason
[6] On the basis of location: Services can be classified on the basis of place of service
provided
Service provider go to the customer, E.g. House
1 Where Customer is Located
Repair
Where Service provider is
2 Customer go to service, E.g. hospital
Located
3 Both Ambulance
Chapter-2: Service Marketing Environment
[1] Internal Environment: Internal (Micro) environment consist of all the elements in
the company’s immediate environment that affect the performance of the company.
These include employees (Internal marketing) direct sale agents, suppliers,
competitors, customer, public etc. The micro environment is most crucial in service
sector because these elements are directly involved in service marketing. Customers
have direct inter-action and they get an idea about the quality of services provided by
firm. Therefore the management must provide proper training and motivation to the
internal marketing team.
Internal environment also include policies, mission, vision, objectives, brand equity,
physical assets, R & D, Human resources, Marketing capabilities.
GOODS
SERVICES
1) Tangible
1) Intangible
2) Homogenous
2) Heterogeneous
3) Production, distribution
3) Productions, Distribution &
separated from
Consumption are Simultaneous
consumption.
process.
4) A Thing
4) A process
5) Core value produced in
5) Core value produced in buyer
factory
seller meet.
6) Customers do not
6) Customer participate in the
participate in the production
production process.
process.
7) Cannot be stored
7) Can be Stored
8) No Transfer of Ownership.
8) Transfer of Ownership
GOODS MARKETING
1) It refers to marketing of
SERVICE MARKETING
tangible products.
1) It refers to marketing of
2) Marketing task is relatively
intangible services
simple
2) Marketing task is relatively
3) It has limited consumer
difficult.
connectivity
3) It has greater consumer
4) It can be standardized
connectivity.
5) Only marketing dept. deals
4) It cannot be standardized.
with consumer
6) Marketing mix consists of 5) Many dept. deal with consumer
4ps directly
7) It involves multiple 6) Marketing mix consists of 7Ps
distribution channels (or ps)
8) Quality problem arises 7) It involves limited distribution
before goods are produced. channels.
9) Technical features are 8) Quality problem arises during
important. service delivery
10) Internal marketing is less 9) Technical features & functional
practiced. performance are important.
10) Internal marketing is more
practiced.
Salt
High Soft Drinks
Detergent
Automobile
T Cosmetics
A Fast food outlet
Ad agency
N Airline
G Investment
Consulting
I Teaching
B
L
E
[1] Pure Tangible Goods: Companies offer tangible products only, Example: soap,
toothpaste, salt with no services consumer buy these products on the basis of direct
utility they get.
[2] Tangible Goods with services: Companies offer tangible goods with some services,
Example: Air Condition, TV, Car, Computers, Water Cooler, Washing machine etc. It
has more of tangible goods and some services like guarantee, installation, training,
after sales services.
[3] Goods & Services in Equal Proportion: Companies offer goods and services in
equal proportion, Example: Fast food outlet, food, menu card is tangible while
ambience, décor, hospitability, efficient services are intangible.
[4] Major Services Minor Goods: Companies offer major services accompanied by
minor goods, Example: Airlines Tangible items include food, drink, ticket, boarding
pass; while intangible services include comfort, speed, travel.
[5] Pure Services: Companies offer pure services with no element of tangible products,
Example: Services provided by doctors, lawyers, teachers etc.
Segmentation of Services
Market segmentation is the sub- dividing of market into homogeneous sub section of
customers , where any sub section may conceivable be selected as a market target to
be reached with a distinct market mix. The marketer has to identify his targeted
customers (segments ). For example, a motorcycle manufacturing company has to
identify their market segments, like female officers, teenage college students, middle
aged customers. After identifying the segments the marketer ( manufacturer ) has to
understand their tastes and expectations. In the case of female customers, they need
not use much power full vehicles, like that the teenagers demand most powerful and
stylish vehicles and the middle aged customers need vehicles having more mileage.
Benefits of market segmentation
No one can satisfy all people all time, can satisfy some people all the time or all people
for some time. This concept is reflected in market segmentation
Facilitates proper choice of target market
Helps distinguish one customer group from another within a given market
Facilitates effective tapping of the market, adapting the offer to the target
The “ divide and rule” concept as a strategy of dividing markets for conquering
them
Helps crystallize the needs of the target buyers and bring out more predictable
responses from them, helps develop marketing programs on a more predictable
base, helps develop marketing offers that are most suited to each group
Helps specialization required in products/services, distribution, promotion, and
pricing for matching the customer group and developing marketing offers and
appeals that match the needs of such groups.
Makes marketing effort more efficient and economic, helps to identify less
satisfied segments and concentrate on them to improve level of satisfaction
Helps to concentrate efforts on the most production and profitable segments
instead of frittering them away over irrelevant or unproductive or unprofitable
segments
Brings benefits to the customer as well, in various ways
When segmentation attains high sophistication, customers and companies can
choose each other and stay together.
Steps in the Segmentation Process
Five major steps are involved in dividing markets into meaningful segments, although
these steps and their description may vary from one situation to another.
a) Define and analyze the market—determine market parameters (based on
characteristics that may include or exclude customers from a group) within
organization’s mission and business definition, as well as its strategic intent.
b) Identify and describe potential segments—decide on the most useful
dimensions or variables for selecting members of potential market segments;
then aggregate customers into homogeneous groups, develop a profile of the
characteristics of each group, etc.
c) Select the segment(s) to be served—select segments by evaluating against
predetermined criteria, then rank according to the organization’s ability to serve
the market profitably while providing customer satisfaction.
d) Determine the product positioning strategy—determine the best “fit” between a
product and a market according to features most desired by customers;
consider competitors’ positioning strategies, organizational goals, and the
market situation.
e) Design and implement the marketing program—develop a tactical plan
(marketing mix) and determine objectives for the marketing program; all
elements of the marketing mix must be consistent with the selected positioning
strategy.
Bases of segmentation
1. Geographic
a. Region- east, west , south, north, Asian, European, India etc
b. City or metro size etc
c. Density – Urban, rural etc
d. Climate – Hot. Cold, Rainy etc
2. Demographic
a. Age- childhood, young etc
b. Gender – male, female
c. Marital status – married , unmarried
d. Family size
e. Income
f. Purchasing capacity and
g. Price preference
h. Education
i. Occupation
3. Psychographic
a. Life style – culture oriented, sports oriented, outdoor oriented etc
b. Personality
4. Behavioristic
a. Benefit segmentation – economic, durable, value for money etc
b. Purchase occasion – time, objective, location, person,
c. User status
d. Usage rate
e. Brand loyalty
Chapter-3: Consumer Behavior in Services marketing
Meaning: Acc to Walter & Paul “Consumer behavior is the process whereby individuals
decide whether, what, when, where, how and from whom to purchase goods and
services.”
1) Problem Recognition: When the buyer feels the need of satisfying a particular
want. The need may arise due to some internal or external stimuli.
For Example: Bank promotion of car loan at low rate of internal can create
desire and need of buying a car.
5) Post Purchase Behavior: After consuming the services consumer will evaluate
the quality of services in terms of consumer expectations and services
perceived performance. If the services fall short of expectations consumer is
disappointed and if meets expectation, the consumer is satisfied if exceeds
expectations the consumer is delighted. Thus the post purchase behavior of
consumers is most important to marketers. A good word of mouth travels fast.
However in services as consumer also take part in the process of services
delivery he is also responsible for the service performance.
Consumer Behavior
Problem Information
Recognition Search
Post Evaluation
Purchase of
Beahvior Alternatives
Purchase
Decision
DIFFERENT BUYING BEHAVIOR: There are four types of buying behavior based on
two conditions namely:
i. Involvement of customer
ii. Brand differences. This can be seen as below
i. Internal Marketing: The Company does internal marketing to its employees. The
company has to provide space, facilities, and equipment’s. The company has
to recruit staff, train and motivate them. The internal marketing enables the
promise. Employee satisfaction is the key factor in internal marketing. The
company will not be successful unless employees are willing to deliver on the
promise.
ii. External Marketing: The Company does external marketing on its customer. It
promises benefits, explains features and assures satisfaction by way of
advertisement and other means of communication. It is nothing but marketing
function of the organization. It is anything that is communicated to the customer
before service delivery.
iii. Interactive Marketing: The service provider does interactive marketing with the
customer. The provider is one who interacts with the customer. The provider is
the face of the company and represents the company. It is at this point the
service is delivered. The provider keeps the promise made by the company to
the customer.
4) Promotion
Promotion mix, as it is mentioned the aspect of selling and advertising, or
communicating the benefits of the product or service, to the target customers or the
market segment involved in order to persuade them to purchase such products or
services.
Promotion Objectives
Develop personal relations with client (personal relations might result in
satisfaction, more than their service offer).
Make a strong impression of competency, honesty and sincerity (professional
orientation to service transaction so as to win buyers confidence in sellers
abilities to deliver the services).
Should be able to use indirect selling techniques (creating derived demand or
act as a buying consultant).
Manage to maintain a fine image by positive word of mouth.
Packaging and customization.
The Guidelines which can be kept in mind while promoting services are as follows
use simple, clear messages;
emphasis the benefits of service;
promise only that which can be delivered and do not exaggerate claims;
build on word-of-mouth communication by using testimony of actual consumers
in advertisements; and
provide tangible clues to services by using well-known personalities or objects
to help customers identify the service.
Target Audience
While defining the objectives of the communication campaign, the target audience is
to be cleared. In service sectors there is a direct contact between the person who
provides the service and the customers.
Therefore, some amount of promotion should be targeted at the employees so as to
motivate them to serve the customer better. In such communications the objective can
also be to educate the employees about how to handle operational problems so as to
increase their performance level.
Promotion Mix
Advertising
Advertising is any kind of paid, non-personal method of promoting by an identified
organisation or individual. Certain services such as entertainment (cinema, theatre),
passenger and freight transport (roadways, airlines, trains), hotel, tourism and travel,
insurance have been advertising heavily in newspaper, magazines, radio, TV to
promote greater usage and attract more customers. However, certain service
professionals such as doctors, accountants, and lawyers, have rarely used advertising
as a means of increasing their clientele.
Objectives of advertising have been identified as:
creating an understanding of the company in the customers' minds by
describing the company's services, activities and its areas of expertise
creating a positive image for the company
building a strong sense of identification with the customer by turning his needs,
values and attitudes
creating a positive background for the sales people to sell the services by
providing all relevant information about the company.
Word of Mouth (WOM)
Word of mouth plays an important role in promoting services. Services are adopted, if
not more, as much because of word of mouth communications as because of active
promotion by marketers. However, people seldom pass on information about a product
or service without some reasons. Managers who want to take advantage of word of
mouth communication should make specific efforts in this direction. Given below are
some suggestions for stimulating a positive word of mouth (apart from providing
excellent service quality)
-Offering a gift, discount or other reward to customers who bring in new customers.
-Asking customers who express satisfaction, to tell their friends.
-Running a newsletter and asking customers to contribute. Contribution may be in
terms of
letters, stories or ideas. This can also be done through website.
-Reward your regular customers with some freebies.
-Target opinion formers.
3 Additional Ps of Service Marketing
For service sector, it is observed that the traditional marketing mix is inadequate
because of three main reasons. The first reason is that the original marketing mix was
developed for manufacturing industries, which implies that the services offered by
service companies ought to be changed in a more product like manner so that the
existing marketing tools can be applied. The second reason is that the marketing
practitioners in the service sector found that the marketing mix does not address to
their needs. They observed that the services have certain basic characteristics, which
in turn have marketing implications. For example there is a problem as regard to
maintaining the quality due to lack of standardization or services can't be inventoried,
patented or transferred. The third reason is that since services are basically different
in comparison to physical products the marketing models and concepts have,
therefore, to be developed in direction of the service sector. In order to solve these
problems, 3 more additional Ps were developed. They are –
1. People
2. Physical evidence, and
3. Process.
c. Customers
Customers are important because they are a source of influencing other customers.
In the case of doctors, lawyers, consultant’s one satisfied customer will lead to a chain
reaction, bringing in his wake a number of other customers. Thus as a marketing
manager, your first task should be to ensure complete satisfaction of the existing
customers. The kind of customers that you attract exerts an important influence on
prospective customers. The prospective customer may feel attracted towards the
organization (it may be a restaurant, club, school, college) because it has his 'type' of
customer.
2. Physical Evidence
Physical evidence is the atmosphere where the service is being delivered from. For
example, Cleanliness in doctor's clinic, exterior appearance and interior decor of
restaurant, the comfort of the seating arrangement in a cinema hall, adequate facility
for personal needs at the airport all contribute towards the image of the service
(organisation) as perceived by the customer. The common element in these is that
they are all physical, tangible and controllable aspects of a service organisation. They
constitute the physical evidence of the service. There may be two kinds of physical
evidence:
1. peripheral evidence, and
2. essential evidence
Peripheral evidence is actually possessed as a part of the purchase of service but by
itself is of no value. Airline ticket, cheque book, receipt for a confirmed reservation in
a hotel are examples of peripheral evidence. A cheque book is of value only if you
have money in the bank-without that it is of no significance. Peripheral evidence adds
on to the - value of essential evidence. In a hotel you may find matchbox, writing pad,
pen, complimentary flowers and drinks, which you may take away. These are
Representations of peripheral evidence. Peripheral evidence is possessed and taken
away by the customer, but essential evidence cannot be possessed by the customer;
the building, its size and design, interior layout and decor, logo and mnemonic device
of the organisations are constituents of the essential evidence. The essential evidence
is a very critical input in determining the atmosphere and environment of the service
organisation.
It is the duty of a marketing manager to manage the physical evidence in order to
create the ideal environment for the service. It can be done in two ways: one by making
the service more tangible, and two, by making it easier for the customer to grasp the
concept of the service.
One obvious way of making the service more tangible is by developing a tangible
representation of the. Service as is done in case of credit cards. Credit cards have a
physical entity and are identifiable by their brand name and distinct looks of the card.
Other ways by which a service can be made more tangible is by standardizing the
physical attributes such as location, interior decor, colour scheme etc. Most airlines
use a dress for all their staff to help create a sense of a uniformity.
The second way is to make it easier for the consumer to understand the concept of
the service which you are offering with easily perceived objects and ideas. Promoters
of package tours may provide detailed information about the hotel, food and transport
facility they would be using to help the consumers understand the concrete dimensions
of the tour and thus reduce their anxiety arising out of uncertainty. Information which
helps reduce uncertainty and provides specific: information about the various
dimensions of the service should be provided to prospective consumers.
3. Process
In a service organization, the system by which you receive delivery of the service
constitutes the process. For example, in fast food outlets the process comprises
buying the coupons at one counter and picking up the food against that at another
counter. Services can be described on the basis of the types of processes used in the
delivery of the services.
There are three kinds of delivery processes that are applicable in case of service
products. They are line operations, job shop operations and intermittent operations.
Self service restaurants are examples of line operations. The consumer moves
through logically arranged operations which are arranged in a sequence. When the
consumers require a combination of services using different sequences, the job shop
type of operation is more useful. Hospitals, restaurants and educational institutions
usually have this type of delivery process. In a hospital, some patients need only
consultation in the Out Patient Department, some others may need consultation as
well as medication or X-ray, some patients require hospitalization or surgery,
medication or investigations. All these categories of consumers require a different
combination of dishes. A college may offer courses for full-time students as well as for
working people through correspondence. Firms offering consultancy for projects use
this kind of delivery system. Advertising agencies also use the intermittent delivery
system since each advertising campaign requires a unique set of input factors.
A manager has to take interest in optimizing the efficiency of the organization without
sacrificing the qualitative aspect. Some of the critical questions you need to focus upon
are
What are the steps involved in delivering the service to the consumer?
Are they arranged in the most logical sequence?
If not, can some steps be eliminated, combined or rearranged to form a
smoother sequence?
What are the steps in which the consumer is involved?
Can the consenters' contact be reduced or totally eliminated?
Can we introduce automation to speed up the delivery process?
Chapter-5: Service Guarantees and Service Encounters
SERVICE GUARANTEES
One way of improving the image of the service organization and to improve the
quality of services is to provide service guarantee to customers. Service guarantee is
as much financial consequences as it means refunding the amount to the customers.
Service guarantee will help organization to deliver superior service quality.
SERVICE ENCOUNTER
It is defined as “any episode in which the customer comes into contact with any
aspect of the organization and gets the impression of the quality of services”. It
takes place any time and at any place. It can take the form of
The inherent nature of services makes consistent service delivery difficult for
all employees in the same company and even for the same employee from one
day to another. The extent to which customers are willing to accept this variation
is called ‘Zone of Tolerance’. It falls between desired service and adequate
service.
This can be seen as below:
Word of Mouth
Belief about Desired service
Past Experience
what is possible
Z
O
T
Perceived service
alterations Predicted services
Adequate service
Situational factors
Desired service: It is the type of service customer hopes to receive. It is an ideal level
what customer thinks to be delivered to them in the context of their need. However
most customers are realistic and understand that companies cannot deliver desired
services and hence they expect some level of service as adequate level
Adequate service: It is the minimum level of service which customer will accept without
being dissatisfied. This depends on situational factors and perceived service
alterations.
A performance that falls below the adequate service will cause frustration and
dissatisfaction and the performance that exceeds adequate service will surprise
customer (customer delight).
ZOT may increase or decrease for individual consumer depending upon the factors
such as competition, price and importance of service attributes. The desired level and
adequate level may also expand or contract for a customer. For example, an airline
passenger who is running late will have narrow ZOT and another passenger who has
reached airport much earlier may have high ZOT. For passenger who is running late
a minute seems much longer and his adequate service level increases.
Service marketing is more challenging than product marketing because of the inherent
nature of services. This can be seen as below:
[1] Intangibility: The intangibility of services create following implications
Customer cannot see, touch or feel
No possibility of impulse purchase
No measurement of quality
No transfer of ownership
Cannot be patented
Pricing is difficult
Cannot be stored
The solution is (ways to overcome)
Focus on benefits and visualization
Use brand name and association
Physical representation (increased tangibility)
Documentation
Presenting facts and figures
[5] Ownership: This feature of service create the following implications/ problems
Customer cannot return back the service
Ownership cannot be transferred
Solution:
Focus on advantages of non-ownership
Membership scheme
{I} People are important: For the marketing of services it is the frontline employee
that holds a complete responsibility of either success or failure in service
delivery. Therefore companies must train the frontline staff in customer handling
and customer relationship.
{II} Needs different skills: The service provider must deliver satisfaction the way
his customer wants it. Therefore service marketing needs different skills into
the art of handling the customer. Train people in skills to understand customer
expectations
{III} Different organization structure: Service marketing need different
organizational structure than product marketing. In product organizational
structure the top level is narrow because the top management does not get into
regular contact with customer but in service organization customer comes in
direct contact with service provider. The necessity of physical evidence requires
that the customer is present at the time and place of delivery. The customer is
the king here and all decisions need to be taken keeping his convenience in
mind. The new approach to service marketing rotates the pyramid by 360
degree to bring it virtually upside down. It identifies another very important
element that does not exist in the original pyramid- the service customer.
{IV} Need different approach to pricing: Pricing of services is very difficult task
due to intangible nature of services. It becomes difficult to educate the customer
on the cost factor involved in price component. Even it is difficult for customers
to compare price of different services. It is subjective.
{V} Needs different marketing mix: Services need different marketing mix.
Service involves customer involvement, service provider, physical evidence,
delivery system. Thus due to the inherent nature of services the marketing mix
(4 P’s) is not sufficient and there is need of additional marketing mix.
{VI} Need interactive marketing: Service marketing is interactive marketing. It
involves all the elements of marketing trinity that is management, employees
and customers. It involves internal marketing, external marketing and
interactive marketing.
QUESTIONS
KEYWORDS
Marketing Mix: Set of tools with the help of which marketing exercise is undertaken and
is comprised of 4 Ps namely Product, Price, Place and Promotion. In case of services, three
more Ps can be added – People, Process and Physical evidence.
People: Refers to all the human beings who play part in service creation and delivery
process.
Physical Evidence: The environment in which the service is delivered and where the firm
and customer interact and any tangible component that facilitate the performance of the
service.
Process: Actual procedure, mechanism and flow of activities by which the service is
delivered.
Culture: A set of beliefs, norms, values and customs.
Perception: It is the process by which buyers select, organize and interpret information into
a meaningful impression in their minds.
Attitude: It is a learned predisposition to respond in a consistently favourable or
unfavourable manner with respect to an object. Motivation: It the driving force within
individuals that impels them to act in a particular direction.
Personality: It can be described as the psychological characteristics that determine how an
individual will react to his or her environment.
Life style: It is a person’s distinct pattern of living and is generally expressed in his/ her
activities, interests and opinions.
External Marketing: The efforts of the marketers directed at the final consumers that are in
form of marketing mix – 7 Ps).
Internal Marketing: Internal marketing encompasses the service organization’s efforts
directed at the employees because customer satisfaction depends upon employees’
satisfaction.
Interactive Marketing: Interactive marketing focuses on managing the interaction of the
service organization with the customers because the customer satisfaction depends as
much on interaction as on what service is delivered to them.