Services Marketing Note

7/30/2019 Services Marketing Note

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Services Marketing

Services marketing is a sub field of marketing , which can be split into

the two main areas of goods marketing (which includes the marketing of

fast moving consumer goods (FMCG) and durables) and services

marketing. Services marketing typically refers to both business to

consumer (B2C) and business to business (B2B) services, and includes

marketing of services like telecommunications services, financial

services, all types of hospitality services, car rental services, air travel,

health care services and professional services. The range of approaches

and expressions of a marketing idea developed with the hope that it be


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effective in conveying the ideas to the diverse population of people who

receive it.

Services are economic activities offered by one party to another. Often

time-based, performances bring about desired results to recipients,

objects, or other assets for which purchasers have responsibility. In

exchange for money, time, and effort, service customers expect value

from access to goods, labor, professional skills, facilities, networks, and

systems; but they do not normally take ownership of any of the physical

elements involved. There has been a long academic debate on what

makes services different from goods. The historical perspective in the


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late-eighteen and early-nineteenth centuries focused on creation and

possession of wealth. Classical economists contended that goods were

objects of value over which ownership rights could be established and

exchanged. Ownership implied tangible possession of an object that had

been acquired through purchase, barter or gift from the producer or

previous owner and was legally identifiable as the property of the current

owner.

Adam Smiths famous book, The Wealth of Nations, published in Great

Britain in 1776, distinguished between the outputs of what he termed

productive and unproductive labor. The former, he stated, produced


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goods that could be stored after production and subsequently exchanged

for money or other items of value. But unproductive labor, however

honorable,...useful, or... necessary created services that perished at the

time of production and therefore didnt contribute to wealth. Building on

this theme, French economist Jean-Baptiste Say argued that production

and consumption were inseparable in services, coining the term

immaterial products to describe them.

Definition of Services: The American Marketing Association defines

services as - Activities, benefits and satisfactions which are offered for

sale or are provided in connection with the sale of goods.


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Services -A fresh perspective : Benefits without

ownership

Paying for temporary use of an object or for access to a physical facility is

a way for customers to enjoy things they can not afford to buy, can not

justify purchasing or prefer not to retain and store after use. Renting,

therefore, is the option for customers to have access for usage on fees

where such customers can get benfit of such facilities even though, they

may not own such services / facilities.

There are five broad categories of Non-ownership framework:


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1. Rented Goods & Services: Goods of this category are those ,

where customers can get temporary right to use them e.g. boats,

combine harvesters, fancy costumes & jewellary, taxis etc.

2. Defined space and place rentals: Herein , customers obtain use

of a defined portion of a larger space of building, vehicle or other area.

It can include a seat in aircraft, a dining table in a resturant, a seat in

cinema hall or a chamber in a building etc.

3. Labor & Expertise Rentals: Customers hire other people to

perform owrk which either they can not perform due to lack of expertise


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or choose not to perform e.g. house cleaning, car repairs, Income tax

return filing, management consultancy etc.

4. Access to Shared physical environment: In this category, a

customer can get benefit of the facility while sharing with other

customers simultaneously , by paying a certain fee. They can be outdoor /

indoor or both. Museums, Cinema Halls, Gyms, Ski Shows, Trade shows,

golf Courses are some of its examples.

5. Access to and Usage of systems and networks: here the

customers rent the right to participate in a specified network such as


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telecommunications, utilities, banking, insurance or specialized

information services.

CHARACTERISTICS OF SERVICES

The services have unique characteristics which make them different from

that of goods. The most common characteristics of services are:

Intangibility.

Inseparability.

Perish ability.

Variability


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Intangibility

Services are activities performed by the provider, unlike physical

products they cannot be seen, tasted, felt, heard or smelt before they are

consumed. Since, services are not tangibles, they do not have features

that appeal to the customers senses, their evaluation, unlike goods, is not

possible before actual purchase and consumption. The marketer of

service cannot rely on product-based clues that the buyer generally

employs in alternative evaluation prior to purchase. So, as a result of this,

the services are not known to the customer before they take them. The


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component) in the service product may vary from low to high.

For example: Teaching, Consulting, Legal advices are services which have

almost nil tangible components; While restaurants, fast food centers,

hotels and hospitals offer services in which their services are combined

with product (tangible objective) , such as food in restaurants, or

medicines in hospitals etc.

Inseparability

Services are typically produced and consumed simultaneously. Incase of

physical goods, they are manufactured into products, distributed through

multiple resellers, and consumed later. But, incase of services, it cannot


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be separated from the service provider. Thus, the service provider would

become a part of a service.

For example: Taxi operator drives taxi, and the passenger uses it. The

presence of taxi driver is essential to provide the service. The services

cannot be produced now for consumption at a later stage / time. This

produces a new dimension to service marketing. The physical presence of

customer is essential in services. For example: to use the services of an

airline, hotel, doctor, etc a customer must be physically present.

Inseparability of production and consumption increases the importance

of the quality in services. Therefore, service marketers not only need to


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develop task-related, technical competence of service personnel , but

also, require a great input of skilled personnel to improve their marketing

and inter personal skills.

Perish ability

Services are deeds, performance or act whose consumption take place

simultaneously; they tend to perish in the absence of consumption.

Hence, services cannot be stored. The services go waste if they are not

consumed simultaneously i.e. value of service exists at the point when it

is required.


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The perishable character of services adds to the service marketers

problems. The inability of service sector to regulate supply with the

changes in demand; poses many quality management problems. Hence,

service quality level deteriorates during peak hours in restaurants, banks,

transportation etc. This is a challenge for a service marketer. Therefore, a

marketer should effectively utilize the capacity without deteriorating the

quality to meet the demand.

Variability

Services are highly variable, as they depend on the service provider, and

where and when they are provided. Service marketers face a problem in


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standardizing their service, as it varies with experienced hand, customer,

time and firm. Service buyers are aware of this variability. So, the service

firms should make an effort to deliver high and consistent quality in their

service; and this is attained by selecting good and qualified personnel for

rendering the service.

Difference between Goods and Services:

Goods Services

A physical commodity A process or activity

Tangible Intangible

Homogenous Heterogeneous


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Production and distribution are separation

from their consumption

Production, distribution and consumption are

simultaneous processes

Can be stored Cannot be stored

Transfer of ownership is possible Transfer of ownership is not possible

Salt Soft Drinks Detergents Automobiles Cosmetics Fast food Outlets

INTANGIBLE DOMINANT

TANGIBLE DOMINANT

Fast food Outlets

Advt. Agencies Airlines

Investment Mgt. Consulting Teaching


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Types of Services

1.Core Services: A service that is the primary purpose of thetransaction. Eg: a haircut or the services of lawyer or teacher.

2.Supplementary Services: Services that are rendered as a corollaryto the sale of a tangible product. Eg: Home delivery options offered by

restaurants above a minimum bill value

Categories of Services (As per GATS):

1. Business services.

2. Communication services.

3. Construction and related engineering services.


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4. Distribution services.

5. Educational services.

6. Environmental services.

7. Financial services.

8. Health-related and social services.

9. Tourism and travel-related services.

10. Recreational, cultural, and sporting services.

11. Transport services.

12. Other services not included elsewhere.


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Industries Classified within Service Sector :

Transportation & Public

Utilities

Other Services

Transportation Hotels & Other Lodging Places

Railroad Personal Services

Trucking & Interurban passenger Business Services

Water Transportation Misc. Repair Services

Air Transport Motion Pictures

Pipeline except natural gas Amusement & recretional Services

Health Services Legal Services

Communication Educational Services

Telephone & Telegraph Social Services

Radio & Television Membership Organisations

Electricity, Gas & Sanitary

services

Misc. Services

Wholesale Trade Private Household Services


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Retail Trade

Finance, Insurane & Real Estate

Depository InstitutionsNon- Depository Institutions

Security & Commodity Brokers

Insurance agents, brokers & services

Holding and other investment companies

Forces that transform and impact the Service Economy:

Govt. Policies Examples Impact on Service Economy

Changes in RegulationsBan on Smoking in public

Place

Improved Customer Comfort ,

attaracting more people to dine

out.

Privatization

Privatization of Airlines,Elec. Departments, Road

Transportation, Telecom

Sector

Increased competition, leadingto better efficiency and

improved services.

Govt. Regulations on Regulations on Insurance Increased cost but better


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service sectors and banking sector security and services.

Social Changes Examples Impact on Service Economy

Increasing Income Higher Spendings Development of new services

Outsourcing of domestic

servicings

Wedding / Birthday

Functions, Home Cleaning

Services, Baby and Child

care

New players in these sectors,

expanding the business

Health Consciousness

General desire to look fitter

and better (Obesity / Aging

etc.)

Health Clubs, Spas, Gymnasium

Easier access to more

information

Internet Better Consumer awareness

Business Trends Examples Impact on Service Economy

Increase Shareholder

Values

Pressure on company mgt.

to deliver better returns on

investments

Cost minimisation on services

renderes by company. Finding

out new revenue sources.

Emphasis on productivity

and cost cutting

Move to self service

technologies

Replace old technologies with

improved ones to reduce costs.

Mergers & Acquisitions Airlines, Health & General Cost cuttings and aggresive


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Tangible actions are performed on peoples bodies or to their physical

possessions where intangible actions are performed on peoples minds

or their intangible assets.

Based on the above, services can be categoried in to four broad categories

i.e. people procsessing, possession processing, mental stimulus

processing and information processing.

Who or What is the direct receipient of

the service?

Nature of the

Service Act

People Possessions

Tangible Action

People Processing

(Services directed at peoples

bodies)

Possession Processing

(Services directed at physical

possessions)


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PassengerTransportation,

Lodging

Freight Transportation,Repairs and

maintenance, Courier

Services Health Care, Beauty

Saloons, Resturants

Laundry and Drycleaning, Lawn

maintenance

Intangible Action

Mental Stimulus

Processing ( servicesdirected at peoples mind)

Information Processing

(Services directed atintangible assets)

Education,Broadcasting,

Accounting Advertisement /PR Banking Psychotherapy Legal Services Theatres, Museaums Securities, Insurance


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PEOPLE PROCESSING :

Since ancient times, people have sought services directed at themselves-

being fed, lodged, transported, restored health or made more beautiful.

To obtain such services, the consumer has to enter into respective service

zones i.e. Service factory as he himself is an integral part of the process .

For example, to get a haircut, you have to go to saloon and sit there for

the service to be processed by barber. Similarly, for restoring your health,

not only you need to go to a doctor but even have to abide by his advice

and medication.The amount of time required in People processing


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very crucial and also the non-financial costs incurred by him

in terms of time, mental and physical efforts.

POSSESSION PROCESSING : In possession processing , a customer

seeks services from an organization to provide tangible treatment to his

physcial possession - Pest Service, repair of gadgets, delivery of package

by courier, laundering clothes etc.

In this type of processing, production and consumption are not

necessarily simultaenous. Installation, removal and disposal of

equipments, whole sales / retail distribution, cleaning, maintaining and


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storing or repairing physical objects are such processes where the

production and consumption are at different time .

In possession processing, the involvement of customers is lower than

people processing . In this type of process, all customer is to do to drop/

offer its physical objects for service at service factory and then collect it

once, it is repaired / restored.

MENTAL STIMULUS PROCESSING :

Unlike People Processing or Possession Processing , where a customer

has to physically contact the service factory, in case of Mental Stimulus

Processing, there is no need for physical contact of the customer with the


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service factory. Services directed at peoples minds include education,

news , information, professional advice, entertainment and certain

religious activities are services, which come under the category of Mental

Stimulus processing.

Obtaining full benefit of such service requires an investment of time and

mental effort by the customer, though, he may not be required to be

physically present at service factory. To get its benefit, a customer has

to make mentally alert in case of Mental Stimulant Processing e.g. one

can not get output in classroom teaching, if he is sleeping. On the other

hand People Processing doesnot require mental efforts for a customer.


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For example, one can reach his destination by travelling by train, even

though, he may sleep during the journey. It is worthwhile to understand

that core content of this type of service is Information( music, visual or

voice), which now can be digitised and sold as CDs, DVDs , after proper

packaging and marketing like any other phsical product.Accordingly,

services of Mental Stimulus type can be inventoried for consumtion at a

later date.

INFORMATION PROCESSING :

This is quite close to mental stimulus processing as information

possessing also requires information for processing. An audit firm, a


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legal advisor or an investment manager , all provide thier services based

on information. While in case of Mental stimulus Processing, a customer

requires to make mental efforts to gain benefit of the service, that may

not be always the case in case of Information processing.Information

processing can be conveted into physical objects like CD ROMs or DVDs

or letters or Reports.

In view of the very close nature of Mental Stimulus and Information

processing, togather , they are also known as Information based services.


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Managerial Implications of Eight common Features of

Services:

Difference Implications Marketing Related

Topics

Most service productscan not be inventoried.

Customers may bedeclined service or

asked to wait.

Smooth demand throughpromotions, dynamic

pricing .Work with Operations to

adjust capacity.

Intangible elementsusually dominate value

creation

Customers canneither taste, smell

or touch neither cansee or hear them.

Harder to evaluateservice and

distinguish from

To make servicestangible through

emphasis on physicalclues.

Employ concretemetaphors and vivid

images in advertising,


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competitors. branding

Services are often

difficult to visualize

and understand.

Customers percievegreater risks.

Educate customers tomake good choices,

explainwhat to look for,

document performances,

offer guarantee.

Customers may be

involved in co-

production

Customers interactwith providers

equipments,

facilities and systems

Poor task executionby customers may

hurt productivity ,

spoil serviceexperience or even

curtail benefits.

Develop User-friendlyequipment, facilities and

systems.

Train customers toperform effectively.

Provide customer

support.

People may be part of

the service experience.

Apperance, attitudeand behaviour of

Recruit, train and rewardemployees to reinforce


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service personnel

and other customers

can shape the

experience and affect

satisfaction

the planned service

concept.

Target the rightcustomer at the right

time., shaping their

behaviour.

Operational inputs

and outputs tend to

vary more widely.

Harder to maintainconsistency,

reliability and

service quality or to

lower costs through

higher productivity.

Difficult to shieldcustomers from

impact of servicefailures.

Set quality standardsbased on customer

expectations, redesign

product elements for

simplicity and failure

proofing.

Institute good servicerecovery procedures.

Automate customer provide interactions,

perform work while

customers are absent.

The time factor often For customers, time New ways to be found to


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