Online Resources

Congratulations! You now have access to practical templates of the

Services Marketing concepts that you will learn in this book. These
downloadable templates will help you implement your learnings
in the real world and give you an in-depth understanding of the
concepts. The templates include:

1. Customer Feedback Form Template for a Service Provider

2. Cost Sheet Template for a Holiday Tour Operator

3. Revenue and Costing Sheet Template for an Education

Service Provider

To access the templates, follow the steps below:

1. Go to www.vibrantpublishers.com

2. Click on the ‘Online Resources’ option on the Home Page

3. Login by entering your account details (or create an

account if you don’t have one)

4. Go to the Self-Learning Management series section and

click on the ‘Services Marketing Essentials You Always
Wanted To Know’ link and access the templates.

Happy self-learning!
This page is intentionally left blank
 TM

SELF-LEARNING MANAGEMENT SERIES

SERVICES
MARKETING
ESSENTIALS
YOU ALWAYS WANTED TO KNOW

A deep dive into the theory and practice of Services Marketing

VISHAL DESAI
Services Marketing Essentials
You Always Wanted To Know
First Edition

© 2023, By Vibrant Publishers, USA. All rights reserved. No part of this publication
may be reproduced or distributed in any form or by any means, or stored in a database
or retrieval system, without the prior permission of the publisher.

Paperback ISBN 10: 1-63651-173-2

Paperback ISBN 13: 978-1-63651-173-3

Ebook ISBN 10: 1-63651-174-0

Ebook ISBN 13: 978-1-63651-174-0

Hardback ISBN 10: 1-63651-175-9

Hardback ISBN 13: 978-1-63651-175-7

Library of Congress Control Number: 2023939895

This publication is designed to provide accurate and authoritative information

in regard to the subject matter covered. The Author has made every effort in the
preparation of this book to ensure the accuracy of the information. However,
information in this book is sold without warranty either expressed or implied. The
Author or the Publisher will not be liable for any damages caused or alleged to be
caused either directly or indirectly by this book.

Vibrant Publishers books are available at special quantity discount for sales
promotions, or for use in corporate training programs. For more information please
write to [email protected]

Please email feedback / corrections (technical, grammatical or spelling) to

[email protected]

To access the complete catalogue of Vibrant Publishers, visit

www.vibrantpublishers.com
 SELF-LEARNING MANAGEMENT SERIES

PAPERBACK*
TITLE
ISBN

AGILE ESSENTIALS 9781636510057

BUSINESS LAW ESSENTIALS 9781636511702

BUSINESS PLAN ESSENTIALS 9781636511214

BUSINESS STRATEGY ESSENTIALS 9781949395778

COST ACCOUNTING & MANAGEMENT ESSENTIALS 9781949395358

DATA ANALYTICS ESSENTIALS 9781636511184

DECISION MAKING ESSENTIALS 9781636510026

DIGITAL MARKETING ESSENTIALS 9781949395747

DIVERSITY IN THE WORKPLACE ESSENTIALS 9781636511122

ENTREPRENEURSHIP ESSENTIALS 9781636511603

FINANCIAL ACCOUNTING ESSENTIALS 9781949395327

FINANCIAL MANAGEMENT ESSENTIALS 9781949395372

HR ANALYTICS ESSENTIALS 9781636510347

HUMAN RESOURCE MANAGEMENT ESSENTIALS 9781949395839

LEADERSHIP ESSENTIALS 9781636510316

MARKETING MANAGEMENT ESSENTIALS 9781636511788

MACROECONOMICS ESSENTIALS 9781636511818

MICROECONOMICS ESSENTIALS 9781636511153

OPERATIONS & SUPPLY CHAIN MANAGEMENT

9781949395242
ESSENTIALS

ORGANIZATIONAL BEHAVIOR ESSENTIALS 9781636510378

ORGANIZATIONAL DEVELOPMENT ESSENTIALS 9781636511481

PERSONAL FINANCE ESSENTIALS 9781636511849

PRINCIPLES OF MANAGEMENT ESSENTIALS 9781949395662

PROJECT MANAGEMENT ESSENTIALS 9781636510712

SALES MANAGEMENT ESSENTIALS 9781636510743

SERVICES MARKETING ESSENTIALS 9781636511733

STAKEHOLDER ENGAGEMENT ESSENTIALS 9781636511511

TIME MANAGEMENT ESSENTIALS 9781636511665

*Also available in Hardback & Ebook formats
This page is intentionally left blank
 About the Author
Vishal Desai has two decades of formidable
work experience as Category and Business
Head at leading Indian entertainment
companies viz: Reliance ADAG’s Zapak.
com, Shemaroo Entertainment Limited, and
Milestone Interactive Group. He has worked
extensively in sales and marketing strategy,
brand and product management, and
corporate strategy. His expertise lies in launching new products
with an optimal marketing mix and managing products through
their entire life cycle. The portfolio of brands launched by him,
while working at Indian licensee companies, includes Sony
PlayStation One, Slumdog Millionaire, Spiderman, WWE Raw,
and several other franchises across gaming and movie
entertainment. He has been a speaker and delegate at conferences
and seminars and has written articles in leading publications.
Being a passionate quizzer, he organizes business quiz
competitions at B-Schools and has won the International Business
Simulation competition organized by Virginia Commonwealth
University. As a subject matter expert, he has contributed to the
development of educational e-content for Govt. of India’s
University Grants Commission. He prefers to teach at media and
management schools as a visiting faculty and has authored the
book ‘Sales Management Essentials You Always Wanted to Know’
that has been released worldwide by Vibrant Publishers. He is a
business management post-graduate from NMIMS University,
India.
 Other Contributor
We would like to thank our editor, David Fogarty for his
contribution to making this book the best version possible. He has
over 30 years of experience as an international business executive
working for the world’s largest Fortune/Global 500 firms. He
has done multiple long-term international assignments and has
done business in over 60 countries and in all continents including
Antarctica.

David is a Master Black Belt in Six Sigma Quality, has 7 patents/

patents pending, and over 50 published research papers and
books. David’s research interests are focused on the application of
global analytics to improve business performance.

David also has over 15 years of teaching experience and has held
various adjunct academic appointments at both the graduate and
undergraduate level in statistics, international management, and
quantitative analysis for business.
 Table of Contents

1 Introduction to Services 1
1.1 Definitions and Characteristics of Services 4
1.2 Differences Between Goods and Services 13
1.3 Tangibility Continuum/Spectrum 14
Quiz 20
Chapter Summary 23
Exercise 24

2 The Marketing Mix for Services 25

2.1 The Extended Marketing Mix 26
Quiz 51
Chapter Summary 55
Case Study – Starbucks 56
Activity 59

3 Models of Service Quality 61

3.1 GAPS Model of Service Quality 62
3.2 SERVQUAL (Or RATER) Model 67
3.3 SERVPERF Model 74
3.4 Grönroos Model (Nordic) 76
3.5 Levels of Customer Expectations 78
3.6 Zone of Tolerance 80
Quiz 83
Chapter Summary 87
Assignment 88

4 What do Consumers Perceive, Seek, Select, and

Experience? 89
4.1 Identify Consumer Wants and Desires 90
4.2 Search, Experience, and Credence Properties of
Services 93
4.3 Consumer Perception, Expectation, and Choice 96
 4.4 Consumer Post-experience Evaluation and
Satisfaction 107
4.5 Service Recovery and Service Guarantee 110
Quiz 122
Chapter Summary 126
Case Study – Disneyland’s initial failure in Europe 127
Assignments 131

5 Service Design and Standards 133

5.1 Service Innovation, Development, and
Implementation 134
5.2 Elements and Types of Physical Evidence in Services 141
5.3 Service Design, Service Process Design, and Service
Blueprint 145
5.4 Customer-defined Service Standards 152
5.5 Servicescape 155
Quiz 163
Chapter Summary 167
Case Study – Innovative Services from AirBnB 168

6 Communicating and Delivering the Promise of

Service Quality 171
6.1 Integrated Marketing Communication (IMC) for
Services 172
6.2 Challenges in Marketing Communication for
Services 173
6.3 Aligning Service Promise and Delivery 175
6.4 Role of Employees, Customers, and Channel Partners in
Service Delivery 176
6.5 Matching Service Capacity with Demand 179
Quiz 186
Chapter Summary 190
Assignment 191
7 Pricing of Services 193
7.1 Different Prices for Different Consumers 194
7.2 Customer Cost for Services 196
7.3 Pricing Strategies for Services 198
Quiz 205
Chapter Summary 209
Case Study – Netflix’s Global Pricing Strategy 210

Bibliography 213
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 Preface
Right from my B-school days, I have had a flair for writing, be
it for a college magazine, a news column or in response to an
editorial piece. But the grind of the corporate world didn't really
spare me any time to follow my passion for writing. During one
of the conferences on the media and entertainment industry that I
would attend every year, I happened to network with the Dean of
a leading media school of India. He spontaneously invited me for
a guest session with the students of his media school. Though I
had been a speaker at a couple of seminars in the past, this was my
first interaction as a guest speaker with a bunch of young talented
students who were more than eager to learn from my experiences.
At the same time, I was excited to share anecdotes from my
experience of having worked for a decade or so in the media &
entertainment industry. The interaction lasted for around two
hours instead of an hour that was scheduled. This was my first
experience as a tutor and the overwhelming feedback I received
from the students encouraged me to take up a full time job as a
faculty at a B-school. The academic environment inspired me to
once again explore my flair for writing and create a body of work.
This led to my association with Vibrant Publishers to author
my first book titled ‘Sales Management Essentials You Always
Wanted To Know’ and going forward with this book on services
marketing. Another objective of writing both the books is to
present the readers an easy to comprehend content on the subject
matter in a concise manner. Authoring both the books involved
writing content based on my industry experience, research about
current trends and case studies, established theories and my
understanding and perspective about the subjects. The overall
experience of writing the books has been quite fulfilling for me.
This book deals with the nuances involved in the marketing of
services from strategic as well as operational dimensions.. It
gives the reader an insight into why services require an extended
marketing mix as compared to that for tangible goods and
how marketers can improve their service delivery for ensuring
customer satisfaction.
 Introduction to the book
Services Marketing Essentials You Always Wanted To Know has
been written for students, marketing professionals, and faculty
members of B-Schools. It focuses on the fundamental theories
and practice of services marketing and emphasizes the fact that
services have unique characteristics as compared to those of
physical goods. The service industry is growing exponentially
worldwide but requires a differentiated approach to the marketing
of the services. This book has been written keeping in mind the
syllabi of courses on the subject and can be referred to as a ready
reckoner for the same. It contains several examples and case
studies for a better understanding of the subject. It deals with all
the essentials of services marketing that are practiced by service
organizations to make decisions about marketing and promoting
their service offerings to achieve the desired sales objectives.

By the end of the book, you will be able to:

● Learn how to formulate and implement an extended

marketing mix for service offerings

● Understand the marketing approach required for effective

decision-making concerning services

● Align services marketing strategy in the best practices

followed by the industry in today’s competitive marketplace

● Learn various pricing strategies for selling services

This page is intentionally left blank
 How to use this book?
This book can be used as a ready reckoner or a handy guide on
Services Marketing.

1. It is suggested to read the chapters in a chronological

manner.

2. Readers should solve the case studies, assignments, and

quizzes that are given at the end of each chapter to reinforce
the concepts mentioned in the book.

3. Readers can refer to the websites listed at the end of the

book to download free templates for testing new service
ideas, conducting consumer behavior surveys, customer
satisfaction surveys, etc.
This page is intentionally left blank
Who can benefit from this book?
1. Faculty members, students, and young professionals from
marketing/business/sales management functions.

2. Entrepreneurs who wish to enhance their knowledge about

the best practices followed by service firms for business
growth.

3. Marketing Executives and Managers who may wish to

reinforce their learnings about services marketing and
implement the same during their career.
This page is intentionally left blank
Chapter 1

Introduction to Services

"E very Business is a Service Business……” remarked

Dr. Philip Kotler who is known as the Father of
Modern Marketing.1 To many of us, a service is an act or
performance offered by one person to another, and are
intangible product offerings whereas goods are tangible
ones. However, some marketers and experts argue that
there are very few offerings that can be categorized as pure
services. Most of the products involve a blend of tangible
and intangible components. For example, when consumers
plan to buy a car, their buying decision depends not just
on the price and the tangible features of the car but also on
how well they are served (intangible component) by the
sales staff while visiting the car showroom, how good is the
visual appeal of the showroom (tangible component), and
how convenient is it to complete the entire buying process
right from billing, availing loan to receiving the car's delivery
(service components). All these factors put together help the

1. Quotes from Philip Kotler, https://www.pkotler.org, (accessed May 16, 2023),

https://www.pkotler.org/quotes-from-pk
www.vibrantpublishers.com
2 Services Marketing Essentials You Always Wanted To Know

consumers evaluate the overall quality of the product

offering that various car manufacturers offer their customers.
Similarly, in the hospitality industry, while availing an
accommodation at a hotel, one considers not just the service
level but also the visual appeal of the room, quantity and/
or quality of the tangible items like toiletries, tea bags, food,
bathroom towels, etc. which are served in the room. This
introductory chapter will lay a foundation for you to gather
and assimilate the ideas which have influenced the theory
and practice of ‘Services Marketing’ under the broad domain
of marketing management.

The key learning objectives of this chapter include the

reader's understanding of the following:

● Growth of the service industry over the decades

● Definitions and characteristics of services

● Differences between goods and services

● The spectrum of product offerings from pure goods to

pure services

A services-dominated economy is a feature of developed

nations. In developing and less developed countries, most people
are occupied in primary activities such as agriculture, forestry,
fishing, mining, etc. The slice of the world economy representing
the services sector grew manifold during the 20th century. In the
United States, for example, the services sector accounted for more
than half the gross domestic product (GDP) in 1929, two-thirds
in 1978, and more than three-quarters in 1993. In the early 21st
century, service industries accounted for more than three-fifths of

www.vibrantpublishers.com
Introduction to Services 3

the global GDP and employed more than one-third of the labor
force worldwide.2 As goods became increasingly standardized
due to mechanization, companies started differentiating
themselves from other companies by the way they served the
customers. The differentiating factors were quick delivery, better
after-sales service, financing options (EMIs), exchange or return
facilities, etc.

Parallelly, an increasing number of citizens being employed

led to the growth of the service industry. Tasks that were earlier
done by consumers themselves started getting outsourced to
professional agencies due to the scarce time available to them to
carry out personal jobs.

A report titled "Services Global Market Report 2021: COVID-19

Impact and Recovery to 2030" by ResearchAndMarkets.com states
that the services market was worth $10814.49 billion globally at
the end of 2020 and is expected to reach $15683.84 billion in 2025
at a Compound Annual Growth Rate of 7%.

The penetration of the internet, technological advancements,

and consumerism have all given an impetus to varied services.
The invention of the Internet has led to the birth and growth of
several services such as Internet Service Providers (ISP), email
services, website and app development, e-comm services, local
courier services, and several others. Going forward, technological
advancements like Artificial Intelligence, the Internet of Things
(IoT), Cyber Security, etc. will lead to the growth of data
management and data analysis services.

Moreover, as people look for ways to unwind themselves

from their hectic urban schedules, they will increasingly engage

2. Service Industry Definition | Britannica Money, www.britannica .com,

accessed June 4, 2023, https://www.britannica.com/money/service-industry
www.vibrantpublishers.com
4 Services Marketing Essentials You Always Wanted To Know

in leisure, entertainment, and lifestyle activities. This will further

give a push to many service industries like travel and tourism, live
events and sports, movies, TV and OTT channels, gyms, salons,
etc.

1.1 Definitions and Characteristics of Services

Service has been defined by several authors over a period

considering the following contexts:

a. What constitutes a service?

b. What is the purpose of consuming any service?

c. What is the nature of service?

d. How much money is paid for the service?

e. Who pays for the service?

f. Who consumes the service?

1.1.1 Definitions of services

Philip Kotler defines services as ― Any activity or benefit
that one party can offer to another that is essentially intangible
and does not result in the ownership of anything. Its production
may or may not be tied to a physical product.3 One of the first
instances, when services were regarded as pure intangibles which
could give satisfaction to the customer and could be sold like
tangible goods, was when Author W. J. Regan, in 1963, proposed

3. Kotler Philip, Marketing Management: Analysis, Planning, Implementation and

Control, Prentice–Hall India, 9th Edition, Pg 467
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Introduction to Services 5

that 'Services represent either intangibles yielding satisfaction

directly or intangibles yielding satisfaction jointly when
purchased either with commodities or other services.4

Later, Robert Judd defined service as a market transaction by

an enterprise or an entrepreneur where the object of the market
transaction is other than the transfer of ownership of a tangible
commodity.5 His definition implied that even if a consumer uses a
tangible product but does not get ownership of that product then
one is just availing of the rental service for goods provided by the
seller.

In 1974, John Rathmell suggested the exclusion of the following

three activities from the scope of the term services:

● First, the non-economic transactions like political, religious,

social, or ecological causes, which the consumer is urged to
accept, support, or join.

● Second, the voluntary contributions in which funds are

transferred and some service is purchased. However, the
price (i.e. how much to pay) is decided by the buyer and not
the seller. This amount varies from buyer to buyer and the
nature of intangibles purchased is difficult to identify. Does
voluntary contribution to a political party mean a purchase
of their support? Does the donation contributing to a
religious organization mean a purchase of their blessings?
The answers are “No”.

● Third, services that are supported exclusively through

various forms of local, state, and central taxation. The
services of policemen, firemen, army men, school teachers,

4. Regan W.J., The Service Revolution, Journal of Marketing (1963), pg 57-62.

5. Robert C. Judd, The Case for Redefining Services, Journal of Marketing (1964),
vol. 28, 1: pg. 58-59
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6 Services Marketing Essentials You Always Wanted To Know

etc. are so categorized. Here, a transaction does take place

and service is rendered. However, the transaction is not
voluntary and the price of the service is not determined
by market forces. Hence, any service delivered by a public
body wherein there is no relationship between the price
paid and the service received is excluded. But, services
like public utilities, museums, and stadiums are included
because an admission ticket has to be purchased despite tax
subsidies being provided for the same.6

Further in 1974, William Stanton defined services as –

Separately identifiable, intangible activities which provide want
satisfaction when marketed to consumers and/or industrial users
and which are not necessarily tied to the sale of a product or
another service.7

Advancement of technology led to the introduction of

machines which started performing certain tasks that humans
could. The definition proposed by Lehtinen in 1983 captured this
factor. He defined services as – An activity or a series of activities
that take place in interactions with a contact person or a physical
machine and which provides consumer satisfaction.8

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.9

6. Rathmell John, Marketing in the Service Sector, Winthrop Publishers, 1974

7. Services Marketing – Definition and Characteristics, www.yourarticlelibrary.com
accessed June 4, 2023, https://www.yourarticlelibrary.com/marketing/marketing-of-
services-in-india/48729.
8. Lehtinen, U., On Defining Service, Breukelen, Proceedings of the Annual Conference
of the European Marketing Academy, 1983.
9. Services Marketing – Definition and Characteristics, www.managementstudyguide.
com, accessed June 4, 2023, https://www.managementstudyguide.com/definition-and-
characteristics-of-services.htm.
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Introduction to Services 7

Another perspective, by Gummesson, highlighted the

intangible nature of service and defined it as something that can
be bought and sold but one that cannot be dropped onto the foot.10
Whereas, Grönroos’ definition of a service states that – A service is
an activity or a series of activities, of more or less intangible nature
that normally, not necessarily, take place in interactions between
the customer and service employees and/or physical resources or
goods and/or system of the service provider, which are provided
as a solution to customer problems. 11

1.1.2 Characteristics of services

The characteristics of a service are recognized as follows (Refer
to Figure 1.1):

a. Intangibility

b. Variability/Heterogeneity

c. Perishability

d. Inseparability

e. Simultaneity

f. No Ownership

g. Non-Measurability

10. Gummesson, E., Lip service – A neglected area in service marketing, Journal of
Services Marketing, 1987, pp. 19-23.
11. Christian Gronroos, Service Management and Marketing, Massachusetts : Lexington
Books, 1990, p. 28.
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8 Services Marketing Essentials You Always Wanted To Know

Figure 1.1 Characteristics of Services

No Ownership

Intangibility Simultaneity

Characteristics of
Services
Perishability Non-Measurabillity

Variabillity /
Inseparability
Heterogeneity

a. Intangibility
Services are intangible and do not exist physically. Intangibility
can have two dimensions — palpable intangibility and mental
intangibility. Palpable intangibility is a crucial attribute of a
service that differentiates it from a tangible commodity. For
example, insurance or consultancy services cannot be seen,
touched, or smelled. Similarly, one cannot sample a doctor's
consultation, movie screening, magic show, circus, or any
other live event. A train passenger has only a physical ticket
and the expectation of reaching the destination in a safe and
comfortable manner. Several other offerings like banking,
hospitality, wealth management, mobile telephony, and
home cleaning can be regarded as services. Moreover, the
experience of consuming a service is evident to only those
who finally consume the service. The other dimension of
intangibility, which is mental intangibility, signifies the lack
of a clear and mentally tangible representation of a service.
Mental intangibility is high when one cannot visualize the act
of a service being performed and its final result, e.g. financial
www.vibrantpublishers.com
Introduction to Services 9

consultancy services and insurance services. Whereas mental

intangibility is lower when one can partly or fully visualize the
act of rendering a service e.g. during a haircut, a person can
visualize the manner in which the barber will cut the hair, the
instruments that will be used by the barber, and the type of
hairstyle that will be set after the haircut.

b. Variability/Heterogeneity
Due to the distinct nature of services, each rendering of the
same service is unique and cannot be replicated precisely
by the same service provider. Whereas, physical goods
can be produced in a factory and be exactly the same as
per the sample shown to the customer. Hence, services are
heterogeneous. All burgers of a specific variant served at a
burger joint are the same but the service given by the customer
care executive may not be the same for each customer.
Similarly, an employee of a restaurant may be extremely
polite and competent while another may not be that polite
or competent. The quality of a person’s service delivery
even varies according to his or her energy level, customer
orientation, state of mind, or any other extraneous factors
during each customer interaction. Physical goods, on the other
hand, permit pre-defining quality standards, manufacturing
processes, and the level of product defects. Service variability
will always exist where there is human intervention during
service delivery. The dealing between a customer and the
service provider cannot be engineered to perfection. Despite a
highly rigorous and structured service delivery protocol, each
customer interaction involves a distinct psycho-social element
to a service encounter.

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10 Services Marketing Essentials You Always Wanted To Know

c. Perishability
Services cannot be inventoried, returned, or resold once
rendered as they are perishable. Companies selling tangible
goods can produce and stock up their goods to meet future
demand. However, this is not possible for services. For
instance, hotels, airlines, or movie halls cannot maintain an
inventory of their rooms or seats to make them available in the
future. A customer who does not experience stable internet
broadband connectivity cannot return the poor connectivity
to the service provider. Perishability reduces the flexibility of
service providers to align with volatile demand conditions. It
is relatively challenging for service providers to immediately
match their supply level with increased demand level and this
may result in a notional loss of sales revenues. In the service
industry time is of the essence and once lapsed, cannot be
monetized. At the same time if a service is not consumed in
real-time while made available for consumption, then it is lost
permanently.

d. Inseparability
Inseparability signifies that services cannot be separated from
their providers while service delivery. A carpenter has to be
present while doing the carpentry work or a teacher has to
be present in the class while teaching the students. Though a
product can be bought even in the absence of its manufacturer,
for most services, both the service provider and the consumer
have to be present at the same time while the service is being
delivered. A person has to be present on a train or an airplane
while consuming travel services. Service providers can render
their services either themselves or through their representatives
or any equipment placed at the site of consumption. A
musician has to be present in front of the audience when he or

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