Chapter 1: Service Marketing How does Service Marketing Differ from Physical Goods Marketing?

Objectives

After completing the module, the students are expected to:

1. Understand and appreciate the definition, concept, importance and
nature of the Services Marketing in the modern economy

2. Examine the growing importance of service marketing

3. Explain Services Industries, Service as Products, Customer Service, and

Derived Service

4. Discuss the differences between products and services

5. Apply key service marketing concept

Introduction

Differences of Product (finished goods) and Services

 Service marketing is a specialized area of marketing focused on
promoting and selling intangible services, rather than tangible
Whom to whom:
products. Unlike traditional marketing which often emphasize
on physical goods. It involves understanding the unique
 Products are transported through distribution channels;
characteristics of services their intangibility, inseparability,
Services are location based
variability, and perishability and developing strategies to
effectively reach target audiences. Essentially, service Quality:
marketing is about creating and delivering value through
experiences and performances. By embracing theses concepts  Quality of product within itself is embedded at the time of
businesses, organizations, companies and corporations can manufacturing; It may vary from customer to customer
enhance consumers and customers satisfaction and build a
long term loyalty in a competitive marketplace. Focus:

What is Marketing?  More product selling/manufacturing; More on relationship

 According to Philip Kotler: “Marketing is the science and art of
exploring, creating, and delivering value to satisfy the needs Ownership:
and the wants of a target market at a profit. It involves
identifying unmet needs, defining and quantifying the market,  Product can be assets or owned; Services cannot be owned
and creating and delivering value through products and
services that meet those needs. Marketing is also described as Tangibility:
the process of building and maintaining profitable customer
relationships by delivering superior customer value and  Can see, touch, and feel before buying; It is through experience
satisfaction.”
Definition of Service Source of value:
 A service is “a deed, a performance, an effort” (Rathmell 1966)
According to Philip Kotler:  How Materials are chosen; How the service provider behaves
 “A service is any activity or benefit that one party can offer to and performed
another, which is essentially intangible and does not result in
the ownership of anything. The production of the service may The Service Marketing Triangle
or may not be tied to a physical product.”  Based on three key components: organizations, providers, and
customers.
Service Marketing  Linking these components: internal marketing, external
marketing, and interactive marketing.
 Service marketing refers to the promotion and sale of
intangible services rather than physical products. It focuses on
activities, benefits, or satisfactions offered to customers, often
in connection with the sale of goods or as a standalone offering.
Essentially, it's about creating value for customers through
experiences and relationships, rather than just selling tangible
items.
 The process of promoting and selling services, which are
essentially intangible acts or performances that one party can
offer to another, and that do not result in the ownership of
anything. It emphasizes creating, communicating, and
delivering value to a target market at a profit, focusing on
customer satisfaction and building strong customer
relationships.
Why Service Marketing? significant position. If we do not use it today, it labor if ever. If
 Services dominate worldwide economies. labor stops working, it is a complete waste. It cannot be stored.
 Service as a business imperative in goods-focused businesses. Utilized or unutilized services are an economic waste. An
 Deregulated industries and professional service needs. unoccupied building, an unemployed person, credit unutilized,
 Service marketing is different. etc. are economic waste. Services have a high level of
 Service leads to profits. perishability.
 The world economy nowadays is increasingly characterized as Inseperability
a service economy.  Services are generally created or supplied simultaneously.
 This is primarily due to the increasing importance and share of They are inseparable. For an e.g., the entertainment industry,
the service sector in the economies of most developed and health experts and other professionals create and offer their
developing countries. service at the same given time. Services and their providers are
associated closely and thus, not separable. Donald Cowell
Why Service Marketing? states 'Goods are produced, sold and then consumed whereas
the services are sold and then produced and consumed'.
 In fact, the growth of the service sector has long been Therefore inseparability is an important characteristic of
considered as indicative of a country’s economic progress. services which proves challenging to service management
 Economic history tells us that all developing nations have industry.
invariably experienced a shift from agriculture to industry and Heterogeneity
then to the service sector as the mainstay of the economy.  This character of services makes it difficult to set a standard
 This shift has also brought about a change in the definition of for any service. The quality of services cannot be standardized.
goods and services themselves. No longer are goods The price paid for a service may either be too high or too low
considered separate from services. as is seen in the case of the entertainment industry and sports.
 Rather, services now increasingly represent an integral part of The same type of services cannot be sold to all the consumers
the product and this interconnectedness of goods and services even if they pay the same price. Consumers rate these services
is represented on a goods-services continuum. in different ways. This is due to the difference in perception of
 The American Marketing Association defines services as - individuals at the level of providers and users. Heterogeneity
“Activities, benefits and satisfactions which are offered for sale makes it difficult to establish standards for the output of
or are provided in connection with the sale of goods.” service firm.
Ownership
Characteristics of Services  In the sale of goods, after the completion of process, the goods
are transferred in the name of the buyer and he becomes the
 A service is an act or performance offered by one party to owner of the goods. But in the case of services, we do not find
another. They are economic activities that create value and this. The users have only an access to services. They cannot
provide benefits for customers at specific times and places as a own the service.
result of bringing desired change. The term service is not e.g. a consumer can use personal care services or medical
limited to personal services like medical services, beauty services or can use a hotel room or swimming pool, however
parlors, legal services, etc. According to the marketing experts the ownership remains with the providers.
and management thinkers the concept of services is a wider Quality Measurement
one. The term services are defined in a number of ways but not  A service sector requires another tool for measurement. We
a single one is universally accepted. The distinct characteristics can measure it in terms of service level. It is very difficult to
of services are mentioned below rate or quantify total purchase. E.g. we can quantify the food
served in a hotel but the way waiter serves the customer or the
The main characteristics of services: behavior of the staff cannot be ignored while rating the total
 Intangibility process. Hence we can determine the level of satisfaction at
 Perishability which users are satisfied. Thus the firm sells good atmosphere
 Inseparability convenience of customers, consistent quality of service, etc.
 Heterogeneity Nature of demand
 Ownership  Generally, the services are fluctuating in nature. During the
 Quality Measurement peak tourist seasons there is an abnormal increase in the
 Nature of demand demand of services. Therefore, while identifying the salient
features of services one cannot ignore the nature of demand.
E.g. tourists go to hill stations during summer season wherein
Intangibilitv public transport utilities are used substantially. This indicates
 Services are intangible we cannot touch them are not physical that flexibility is the important feature of service.
objects. According to Carman and Uhl, a consumer feels that he
has the right and opportunity to see, touch, hear, smell or taste
the goods before they buy them. This is not applicable to Objectives of Services Marketing
services. The buyer does not have any opportunity to touch
smell, and taste the services. While selling or promoting a The primary objectives of service marketing are to achieve customer
service one has to concentrate on the satisfaction and benefit a satisfaction, build trust, drive revenue growth, differentiate the service
consumer can derive having spent on these services. e.g. An from competitors, and adapt to market trends. These objectives are
airline sells a flight ticket from A destination to B destination. pursued by focusing on the unique characteristics of services, such as
Here it is the matter' of consumer's perception of services than intangibility and variability, and by utilizing the extended marketing mix
smelling it or tasting it. (7Ps).
Perishability
 Services too, are perishable like labor; Service has a high  Customer Satisfaction
degree of perishability. Here the element of time assumes a  Building Trust
  Revenue Growth Lovelock’s Framework of Service Classification
 Market Differentiation
 Trend Adaptation

Core Objectives of Services Marketing

Customer Satisfaction:

Ensuring customers are happy with the service experience is paramount.

This involves understanding their needs, managing expectations, and
delivering on promises.

Building Trust:

Services are often intangible, making trust a crucial element. Building

trust through consistent quality, reliable service, and transparent 1. People Processing (Crafting Experiences That Matter)
communication is essential.
- Services that necessitate the customer’s physical presence, directly
Revenue Growth: impacting them through tangible actions. Example: Consider airlines,
where the focus is on efficiency, comfort, and safety, all experienced
Increasing sales and profitability through effective marketing strategies is directly by the customer.
a key objective. This can be achieved by attracting new customers,
retaining existing ones, and upselling/cross-selling services. Implications:

Market Differentiation:  Production and consumption occur simultaneously,

necessitating physical presence.
Standing out from the competition is vital. This can be achieved through  Success hinges on active customer participation.
unique service offerings, superior quality, or a distinctive brand image.  Key factors include strategic location choices, effective service
process design, and enriching customer experiences.
Trend Adaptation:
2. Possession Processing (Valuing Customer Assets)
Keeping up with changing customer preferences and market trends is
crucial for long-term success. - Services directed at customers’ physical possessions, requiring
specialized care and expertise. Example: Auto repair shops stand out
Supporting Objectives of Service Marketing here, emphasizing meticulous quality, swift turnaround times, and
exceptional care for customer possessions.
Managing the 7Ps:
Implications:
The service marketing mix (People, Process, Physical Evidence, Product,
Price, Place, and Promotion) must be carefully managed to ensure a  This category allows for separation in production and
cohesive and effective service delivery. consumption, leading to cost efficiencies.
 Customer involvement can range from minimal to highly
Internal Marketing: interactive.
 Emphasizes operational flexibility and the adoption of
Cultivating a service-oriented culture within the organization is innovative service models.
important for consistent service delivery and positive customer
interactions. 3. Mental Stimulus Processing (Engaging Minds, Expanding
Horizons)
Relationship Marketing:
- Services aimed at stimulating and developing the customer’s intellect
Building strong, long-term relationships with customers is a key objective and knowledge.
in many service industries.
Example: Universities and educational institutions exemplify this,
Service Quality: focusing on intellectual engagement and knowledge expansion.

Ensuring high levels of service quality is essential for customer Implications:

satisfaction and loyalty.
 Physical presence of the customer is not a prerequisite.
Managing Customer Expectations: Understanding and managing  These services can be stored and accessed when needed,
customer expectations is crucial for delivering a positive service offering substantial flexibility. Optimal benefits require
experience. customers’ time and mental investment.
4. Information Processing (The Art of Managing Intangibles)

- Services centered around the handling and management of intangible

data.

Example: Accounting firms, which handle sensitive financial data,

underscore the importance of trust, precision, and confidentiality.

Implications:

 Predominantly deals with non-physical assets, highlighting the

service’s intangibility.
 Information can often be converted into tangible outputs.
 There’s a significant overlap with mental stimulus processing,
especially in services like financial advising.

Key Takeaways:
Customize Service Design:

 Businesses should tailor their services to align with their

category’s specific needs.

Enhance Customer Engagement:

 They should adapt their approach based on the nature of the

service to foster deeper customer relationships.

Optimize Operational Efficiency:

 They should develop operational strategies that cater to the

unique demands of the service type.