SERVICES MARKETING

Notes 8 Pages

MES INSTITUTE OF MANAGEMENT

Financial Management

HRK

Contributed by

Hanuman Ram Korpal

SERVICES MARKETING

Definition and meaning. Services are the non-physical, intangible parts of our economy, as
opposed to goods, which we can touch or handle. Services, such as banking, education, medical
treatment, and transportation make up the majority of the economies of the rich nations.

A service is something that the public needs, such as
transport, communications facilities, hospitals, or energy supplies, which is provided in a
planned and organized way by the government or an official body.

Features of Services:
1. Intangibility:
A physical product is visible and concrete. Services are intangible. The service cannot be
touched or viewed, so it is difficult for clients to tell in advance what they will be getting. For
example, banks promote the sale of credit cards by emphasizing the conveniences and
advantages derived from possessing a credit card.
2. Inseparability:
Personal services cannot be separated from the individual. Services are created and consumed
simultaneously. The service is being produced at the same time that the client is receiving it; for
example, during an online search or a legal consultation. Dentist, musicians, dancers, etc. create
and offer services at the same time.
3. Heterogeneity (or variability):
Services involve people, and people are all different. There is a strong possibility that the same
enquiry would be answered slightly differently by different
people (or even by the same person at different times). It is important to minimize the differences
in performance (through training, standard setting and quality assurance). The quality of services
offered by firms can never be standardized.
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4. Perishability:
Services have a high degree of perishability. Unused capacity cannot be stored for future use. If
services are not used today, it is lost forever. For example, spare seats in an aeroplane cannot be
transferred to the next flight. Similarly, empty rooms in five-star hotels and credits not utilized
are examples of services leading to economic losses. As services are activities performed for
simultaneous consumption, they perish unless consumed.
5. Changing demand:
The demand for services has wide fluctuations and may be seasonal. Demand for tourism is
seasonal, other services such as demand for public transport, cricket field and golf courses have
fluctuations in demand.
6. Pricing of services:
Quality of services cannot be standardized. The pricing of services are usually determined on the
basis of demand and competition. For example, room rents in tourist spots fluctuate as per
demand and season and many of the service providers give off-season discounts.
7. Direct channel:
Usually, services are directly provided to the customer. The customer goes directly to the service
provider to get services such as bank, hotel, doctor, and so on. A wider market is reached
through franchising such as McDonald’s and Monginis.

Difference between Goods and Services
Given below are the fundamental differences between physical goods and services:
Goods
Services
A physical commodity
A process or activity
Tangible
Intangible
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Homogenous
Heterogeneous
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

Comparison Chart
BASIS FOR
COMPARISON
GOODS
SERVICES
Meaning
Goods are the material items that can
be seen, touched or felt and are ready
for sale to the customers.
Services are amenities, facilities,
benefits or help provided by
other people.
Nature
Tangible
Intangible
Transfer of
ownership
Yes
No
Evaluation
Very simple and easy
Complicated
Return
Goods can be returned.
Services cannot be returned
back once they are provided.
Separable
Yes, goods can be separated from the
seller.
No, services cannot be separated
from the service provider.
Variability
Identical
Diversified
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BASIS FOR
COMPARISON
GOODS
SERVICES
Storage
Goods can be stored for use in future
or multiple use.
Services cannot be stored.
Production and
Consumption
There is a time lag between
production and consumption of
goods.
Production and Consumption of
services occurs simultaneously.

CONCLUSION
Both Goods and Services are necessary for economy to flourish in any country. In 21st century,
service industry is growing rapidly and manufacturing industry has seen lot of innovation in
manufacturing techniques and process because of the technology. Service industry continues
growing dominating the manufacturing industry in both developing and developed countries.
Challenges of Services Marketing

Intangibility
Since services lack physical presence, their quality and value can be
h a r d t o a s s e s s . A c l i e n t w o n ’ t b e ab l e t o f u l l y a p p r e c i a t e a s e r v i c e ’ s
worth until after it has been performed. In some cases, there can be an
extended gap between buying and receiving a service. For example, the
s e r v i c e a s p e c t f o r s o m e o n e w h o ’ s p u r c h a s e d h o m e o w n e r s ’ i n s u r a n c e w i l l
onl y be activated once they file a claim.

Variability
Products can be homogenous and mass produced, however the same is not
true of services. Services are consumed and produced at the same time
and delivered by people, which means the process is never exactly
re p e a t e d . F o r e x a m p l e , l e t ’ s s a y y o u t a k e a t a x i f r o m t h e a i r p o r t t o a
hotel, and again from the hotel to the airport. Even though the service is
similar, the quality will be affected by factors such traffic conditions,
weather, route and the driver.

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Perishability
Unlike products and goods, services cannot be stored, saved, returned or
r e s o l d o n c e t h e y ’ v e b e e n u s e d . E s s e n t i a l l y , t h e v a l u e o f a s e r v i c e
v a n i s h e s o n c e i t ’ s b e e n r e n d e r e d . C o n s i d e r t h a t a i r l i n e s c a n o n l y s e l l
seats prior to departure. Once the plane departs, the inherent value of an
unsold seat is lost.

Competitive Pricing
How you price your services is an important marketing element. You need to be competitive,
so research several competitors’ prices to gauge what your prospective customers expect to
pay. Then assess your costs -- your overhead such as rent, insurance, salaries and supplies -- to
determine if you can meet your costs and make a profit with that pricing. Consider bundling
extra features with your services to differentiate your company and garner a higher price. For
example, you can offer to wax floors as part of your service, or do laundry as part of a bonus
package.

People
As a services company, marketing your people, including you, is paramount. A service is
consumed when it’s purchased or produced -- just the results or effects linger, and sometimes
temporarily. For example, your customer’s home will get dirty again, so the result of your
cleaning delivery is temporary. The client may or may not call you again based on the overall
experience. How your people performed that service will impact repeat business. The
relationship is also important; follow up with your customer with personalized notes or a
telephone reminder as part of your marketing tactics.

Creating a Need
Service marketers may have more of a challenge in creating a need for what they are selling.
While an individual may understand the necessity to purchase a new car, such as when a
current vehicle breaks down, the business owner may not understand why the purchase of
advertising is necessary. The salesperson must create a need for the service by showing
examples of how other businesses increased revenues with an advertising campaign.

Service Marketing Mix – 7 P’s of marketing
The service marketing mix is also known as an extended marketing mix and is an integral part of
a service blueprint design. The service marketing mix consists of 7 P’s as compared to the 4 P’s
of a product marketing mix. Simply said, the service marketing mix assumes the service as
a product itself. However it adds 3 more P’s which are required for optimum service delivery.
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The product marketing mix consists of the 4 P’s which are Product, Pricing, Promotions and
Placement. These are discussed in my article on product marketing mix – the 4 P’s.
The extended service marketing mix places 3 further P’s which include People, Process
and Physical evidence. All of these factors are necessary for optimum service delivery. Let us
discuss the same in further detail.

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1) Product
The product in service marketing mix is intangible in nature. Like physical products such as a
soap or a detergent, service products cannot be measured. Tourism industry or the education
industry can be an excellent example. At the same time service products
are heterogenous, perishable and cannot be owned.
The service product thus has to be designed with care. Generally service blue printing is done to
define the service product. For example – a restaurant blue print will be prepared before
establishing a restaurant business. This service blue print defines exactly how the product (in this
case the restaurant) is going to be.
2) Place
Place in case of services determine where is the service product going to be located. The best
place to open up a petrol pump is on the highway or in the city. A place where there is minimum
traffic is a wrong location to start a petrol pump. Similarly a software company will be better
placed in a business hub with a lot of companies nearby rather than being placed in a town or
rural area. Read more about the role of business locations or Place element.
3) Promotion
Promotions have become a critical factor in the service marketing mix. Services are easy to be
duplicated and hence it is generally the brand which sets a service apart from its counterpart.
You will find a lot of banks and telecom companies promoting themselves rigorously.
Why is that? It is because competition in this service sector is generally high and promotions is
necessary to survive. Thus banks, IT companies, and dotcoms place themselves above the rest
by advertising or promotions.
4) Pricing
Pricing in case of services is rather more difficult than in case of products. If you were a
restaurant owner, you can price people only for the food you are serving. But then who will pay
for the nice ambiance you have built up for your customers? Who will pay for the band you have
for music?
Thus these elements have to be taken into consideration while costing. Generally
service pricing involves taking into consideration labor, material cost and overhead costs. By
adding a profit mark up you get your final service pricing. You can also read about pricing
strategies.
Here on we start towards the extended service marketing mix.
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5) People
People is one of the elements of service marketing mix. People define a service. If you have an
IT company, your software engineers define you. If you have a restaurant, your chef and service
staff defines you. If you are into banking, employees in your branch and their behavior towards
customers defines you. In case of service marketing, people can make or break an organization.
Thus many companies nowadays are involved into specially getting their staff trained in
interpersonal skills and customer service with a focus towards customer satisfaction. In fact
many companies have to undergo accreditation to show that their staff is better than the rest.
Definitely a USP in case of services.
6) Process
Service process is the way in which a service is delivered to the end customer. Lets take the
example of two very good companies – Mcdonalds and Fedex. Both the companies thrive on
their quick service and the reason they can do that is their confidence on their processes.
On top of it, the demand of these services is such that they have to deliver optimally without a
loss in quality. Thus the process of a service company in delivering its product is of utmost
importance. It is also a critical component in the service blueprint, wherein before establishing
the service, the company defines exactly what should be the process of the service product
reaching the end customer.
7) Physical Evidence
The last element in the service marketing mix is a very important element. As said before,
services are intangible in nature. However, to create a better customer experience tangible
elements are also delivered with the service. Take an example of a restaurant which has only
chairs and tables and good food, or a restaurant which has ambient lighting, nice music along
with good seating arrangement and this also serves good food. Which one will you prefer? The
one with the nice ambience. That’s physical evidence.
Several times, physical evidence is used as a differentiator in service marketing. Imagine a
private hospital and a government hospital. A private hospital will have plush offices and well
dressed staff. Same cannot be said for a government hospital. Thus physical evidence acts as a
differentiator.

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