Services Marketing- An

Introduction

Services Marketing- An Introduction

Why Study Services
Marketing?

Services Marketing- An Introduction

 Why study Services Marketing?

You cant ignore it!

Services are usually the forward step in the
evolution of an organization
Service Marketing is a different ball game!
The reason!

Services Marketing- An Introduction

Dependence of economies on service
industries
World GDP- Sector wise

Agriculture; 4%

Manufacturing; 32%

Services; 64%

Source: The World Factbook, 2008

Services Marketing- An Introduction

 Services Dominate the U.S.
Economy
Services, 68% Agriculture, Forestry, Mining,
Fishing, 2.3%

Manufacturing and
Construction,
17.3%

Government, 12.4%
(mostly Services)
Source: Bureau of Economic Analysis, Survey of Current Business, May 2005, Table 1

INSIGHTS
Private sector service industries account for over two-thirds of GDP
Adding government services, total is almost four-fifths of GDP
Services Marketing- An Introduction
Dependence of economies on service
industries
Indias GDP- Sector wise

Agriculture; 22%

Services; 53%
Manufacturing; 25%

Major Economies: % share of Services to GDP

100
80
60
40
20
0
China India UK France USA HK

Services Marketing- An Introduction

 Estimated Size of Service Sector in
Selected Countries
Cayman Islands (95%), Jersey (93%)
Bahamas (90%), Bermuda ( 89%)
Luxembourg (83%)
Panama (80%), USA (79%)

Japan (74%), France (73%), U.K. (73%), Canada (71%)

Mexico (69%), Australia (68%), Germany (68%)

Poland (66%), South Africa (65%)

Israel (60%), Russia (58%), S. Korea (56%)
Argentina (53%), Brazil (51%)

India (48%)
Source: The World Factbook, 200
China (40%)

Saudi Arabia (33%) Services as Percent of GDP

10 20 30 40 50 60 70 80 90
Services Marketing- An Introduction
 Changing Structure of Employment
as Economic Development Evolves

Share of
Employment Agriculture

Services

Industry

Time, per Capita Income Source: IMF, 1997

Services Marketing- An Introduction

Services are usually the forward step in the
evolution of an organization

IBM: Revenue Share of Services

0.5

0.15

1990 2002-03

Services Marketing- An Introduction

 Why Study Services?
Most new jobs are generated by services
Fastest growth expected in knowledge-based
industries
Significant training and educational qualifications
required, but employees will be more highly
compensated
Will service jobs lost to lower-cost countries? Yes,
some service jobs can be exported

Services Marketing- An Introduction

 Why Study Services?
Powerful forces are transforming service
markets
Government policies, social changes, business
trends, advances in IT, internationalization
These forces are reshaping
Demand
Supply
The competitive landscape
Customers choices, power, and decision making

Services Marketing- An Introduction

 Service Marketing is a different
ball game!
More variables
Much more intense consumer interface
Much more Fuzzy than Goods Marketing
The skills of Goods marketing are not directly
transferrable to Services Marketing

Services Marketing- An Introduction

What Are Services?

Services Marketing- An Introduction

 What Are Services?
The historical view
Goes back over 200 years to Adam Smith and
Jean-Baptiste Say
Different from goods because they are perishable
(Smith 1776)
Consumption cannot be separated from
production, services are intangible (Say 1803)
A fresh perspective: Services involve a form
of rental, offering benefits without transfer
of ownership
Include rental of goods
Marketing tasks for services differ from those
involved in selling goods Services
and transferring
Marketing- An Introduction
 What Are Services?
Five broad categories within non-ownership framework:
1. Rented goods services
2. Defined space and place rentals
3. Labor and expertise rentals
4. Access to shared physical environments
5. Systems and networks: access and usage

Implications of renting versus owning (Service

Perspectives 1.1)
. Markets exist for renting durable goods rather than selling them
. Renting portions of larger physical entity (e.g., office space,
apartment) can form basis for service
. Customers more closely engaged with service suppliers
. Time plays central role in most services
. Customer choice criteria may differ between rentals and
outright purchases
. Services offer opportunities for resource sharing
Services Marketing- An Introduction
 Defining Services
A series of deeds, processes and performances provided
or coproduced by one entity or person for another entity or
person.

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 the first
purchaser.

Services Marketing- An Introduction

 Defining Services
Services
Are economic activities offered by one party to
another
Most commonly employ time-based performances
to bring about desired results in:
recipients themselves
objects or other assets for which purchasers have
responsibility
In exchange for their money, time, and effort,
service customers expect to obtain value
from
Access to goods, labor, facilities, environments,
professional skills, networks, and systems
Services Marketing- An Introduction
 Service vs. Product

Physical
Services Marketing Implication
goods
Demand fluctuations difficult to
Tangible Intangible manage
Cost determination difficult
Homogeneo Heterogeneou Lack of standardization
us s Difficult to assess & establish quality
Production Production and Mass production is difficult
separate consumption
from are
High influence of customer on the
consumption simultaneous outcome

Non Cant be inventoried

Perishable Perishable
(Relatively)
Outcomes generally not reversible
Customers have varying tolerance
Low Time High Time
So they towards
are very time and want their
different.
factor Factor
convenience
Services Marketing- An Introduction
 Services Pose Distinctive
Marketing Challenges
Marketing management tasks in the service sector
differ from those in the manufacturing sector
The eight common differences are:
1. Most service products cannot be inventoried
2. Intangible elements usually dominate value creation
3. Services are often difficult to visualize and understand
4. Customers may be involved in co-production
5. People may be part of the service experience
6. Operational inputs and outputs tend to vary more widely
7. The time factor often assumes great importance
8. Distribution may take place through nonphysical
channels
What are marketing implications?
Services Marketing- An Introduction
 Differences, Implications, and
Marketing-Related Tasks
Difference Implications Marketing-Related Tasks
Most service Customers may be Use pricing, promotion,
products and
turned away reservations to smooth
cannot be inventoried
demand; work with ops to
manage capacity
Harder to evaluate
Intangible elements Emphasize physical clues,
service and distinguish
usually dominate employ metaphors and vivid
from competitors
value creation images in advertising
Greater risk and
Services are often Educate customers on
uncertainty perceived
difficult to visualize making good choices; offer
and understand guarantees
Interaction between
Customers may be Develop user-friendly
customer and provider;
involved in co- equipment, facilities, and
but poor task execution
production systems; train customers,
could affect satisfaction
provide good support

Services Marketing- An Introduction

 Differences, Implications, and
Marketing-Related Tasks
Difference Implications Marketing-Related Tasks

People may be part of Behavior of service Recruit, train employees to

service experience personnel and customers reinforce service concept
can affect satisfaction Shape customer behavior

Operational inputs Hard to maintain quality,

and consistency, reliability
outputs tend to vary Redesign for simplicity and
more widely Difficult to shield
customers from failures failure proofing
Time factor often Time is money; Institute good service
assumes great customers want service recovery procedures
importance at convenient times
Find ways to compete on
Distribution may take Electronic channels or speed of delivery; offer
voice telecommunications extended hours
place through
nonphysical channels Create user-friendly,
secure websites and free
access by telephone
Services Marketing- An Introduction
 ButAre they really different?

Products/ Goods, after all, are means of Service onl

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

Services Marketing- An Introduction

 Tangibility Continuum
Salt
Detergents

Golf Clubs
Car
Fast Food Outlets
Highly Intangible

Highly Tangible
Health
Club Airlines
Investment
PlanningTeaching
Consulting

Services Marketing- An Introduction

 Our Interest: How to identify
Service Industry?
Close/ Continuous encounter with the Customer
Ongoing process- constantly evolving
When does the action happen?
Product: Quality, performance etc. will be apparent only
after the sale/ transaction has been made
Service- Quality and performance is evident during the
transaction phase only with very little (if any)
remaining for later.

Services Marketing- An Introduction

 Lets see some examples
Healthcare vs. Pharma
Retail vs. FMCG
Insurance vs. Financial planning
Movies vs. TV Serials
IPL vs. Olympics
Apple vs. Google

Services Marketing- An Introduction

 Transformation of the Service
Economy
Social Business Advances in
Changes Trends IT

Government
Globalization
Policies
New markets and product categories
Increase in demand for services
More intense competition

Innovation in service products & delivery systems, stimulated by better technology

Customers have more choices and exercise more power

Success hinges on:

Understanding customers and competitors
Viable business models
Creation of value for customers and firm
Services Marketing- An Introduction
 Factors Stimulating Transformation
of the Service Economy (1)
Social Business Advances in
Changes Trends IT

Government
Globalization
Policies

Changes in regulations
Privatization
New rules to protect customers,
employees, and the environment
New agreement on trade in services

Services Marketing- An Introduction

 Factors Stimulating Transformation
of the Service Economy (2)
Social Business Advances in
Changes Trends IT

Government
Globalization
Policies Rising consumer expectations
More affluence
More people short of time
Increased desire for buying experiences
versus things
Rising consumer ownership of high tech
equipment
Easier access to information
Immigration
Growing but aging population

Services Marketing- An Introduction

 Factors Stimulating Transformation
of the Service Economy (3)
Social Business Advances in
Changes Trends IT

Government
Globalization
Policies

Push to increase shareholder value

Emphasis on productivity and cost savings
Manufacturers add value through service and
sell services
More strategic alliances and outsourcing
Focus on quality and customer satisfaction
Growth of franchising
Marketing emphasis by nonprofits

Services Marketing- An Introduction

 Factors Stimulating Transformation
of the Service Economy (4)
Social Business Advances in
Changes Trends IT

Government
Globalization
Policies

Growth of the Internet

Greater bandwidth
Compact mobile equipment
Wireless networking
Faster, more powerful software
Digitization of text, graphics, audio, video

Services Marketing- An Introduction

 Factors Stimulating Transformation
of the Service Economy (5)
Social Business Advances in
Changes Trends IT

Government
Globalization
Policies

More companies operating on transnational

basis
Increased international travel
International mergers and alliances
Offshoring of customer service
Foreign competitors invade domestic markets

Services Marketing- An Introduction

 Marketing Mix

Product Additional 3 Ps for

Marketing Services Marketing
Product People
Place Physical evidence
Price Process
Promotion

Expanded Marketing Mix for Services

Services Marketing- An Introduction

 3Ps in detail
People:
All human factors who play a part in service
industry and thus influence the buyers perceptions.
Customer
Effect on the Service Provider
Effect on the other Customers
Employees
Your service is only as good as your representative
Mental inventory

Services Marketing- An Introduction

 3Ps in detail
Physical Evidence/ Servicescape:
The environment in which the service is delivered
and where the firm and customer interact and any
tangible components that facilitate performance or
communication of the service.
Why does it matter really?
Because other wise the service is intangible
A consideration for Customer for judging the service quality
Lets see examples
POS: Brochures, Signage, Letterhead
Uniforms
Demeanor of the representative
Big Bazaar vs. Premium branded store

Services Marketing- An Introduction

 3Ps in detail
Process:
The actual procedures, mechanisms and flow of
activities by which the service is delivered- the
service delivery and operating systems.
Why does it matter really?
Brings method to the madness!
Reinforces the service providers philosophy
Lets see examples
Healthcare
Kingfisher (when launched) vs. Air Deccan

Services Marketing- An Introduction

 Reference
Services Marketing: People Technology& Strategy:

Christopher Lovelock

Services Marketing: Valarie A Zeithaml, Mary Jo Bitner,

Gremler, Pandit

Services Marketing: Dwyne Gremler

Any other book that helps!

Life!

Services Marketing- An Introduction

Some Thoughts

Room service?
Send up a larger room please!

To give real service you must add something

which cannot be bought or measured with
money.
Douglas Adams
Services (British An
Marketing- Writer)
Introduction