CHAPTER 20 Service Marketing

CHAPTER 20
MARKETING OF SERVICES
Marketing Management by Arun Kumar and N Meenakshi

© Vikas Publishing House Pvt. Ltd. 2006
LEARNING OBJECTIVES
• Increasing importance of services in
economies
• All principles of marketing apply to
services
• The nature and special characteristics of
services
• Managing service quality, productivity and
personnel
Learning Objectives (Contd.)
• How to position a service organization and

a brand
• The service marketing mix
• How businesses should manage service

encounters and service recovery
• Innovations in services

Learning Objectives (Contd.)
• Difficult to provide a single definition of

service
• Concept of service has to be understood

either as an exclusive offering from a
company that is primarily intangible, or as a
part of the service-product mix that a
company offers

SERVICE LEVELS
• Service is an intangible offering with little or no
transfer of physical products to the customer
• Service is one part of product-service mix being

offered to customers
• The main offering is the product but the supplier also

provides some services
• Every product or service or any combination of a mix

of the two, ultimately is supposed to provide service
for customers
INCREASING
IMPORTANCE OF
SERVICES
• Advances in technology
• Growth in per capita income
• A trend towards outsourcing
• Deregulation
• Increasing growth in retailing due to
increase in propensity to consumer
ALL PRINCIPLES OF
MARKETING APPLY TO
SERVICES

All Principles of Marketing Apply to Services (Contd.)
• Services impact customers more directly

than products do
• Marketing of services has to be more
deliberate and considered
• Service provider has to carefully audit his
resources and competencies
• Positioning must be razor sharp
• Services more intractable than products
• Service provider must define service very

precisely and also design the appropriate
service-product mix
• Promotion more challenging due to

intangible nature of services
• Same basic service can be provided in

vastly different service facilities providing
different levels of amenities and luxuries

• Same service can be delivered in various

ways
• Marketing mix conveys the positioning of a

service

NATURE OF SERVICES
• Intangibility
• Inseparability
• Presence of other consumers
• Variability
• Perishability
MANAGING SERVICES
• Managing service quality
Companies rated higher on service quality
perform better in terms of market share
growth
Big gap exists between the expectations of
the customers and the level of the service
they get Real barriers while matching
expected and perceived service levels of
customers
Managing Services (Contd.)
Does not understand customer requirements:

Misconception barriers arise when
companies misunderstand customer expectations
No resources: A company may understand

customer expectations but is unwilling to provide
resources to meet them
Bad delivery: The company is not able to
deliver the expected service

Managing Services (Contd.)
Management’s will: A management

eager to improve quality is able to do it
Exaggerated expectations: Exaggerated

promises may become a problem

• Meeting customer expectations
Important to understand and meet
customer expectations
Consumers of services value not only the
outcome of the service encounter but also
the experience of taking part in it
Access: Is the service provided at
convenient locations and at convenient
times, with little waiting period in availing
the service?
Meeting Customer Expectations (Contd.)
Reliability: Service provider should be

able to deliver the promised service each
time the customer decides to avail of it
Credibility: Can customers trust the

service company and its staff?
Security: Can the services be used

without risk?

Understanding customer: If the

company understands the expectations
and also has the capability to serve them,
the customer is satisfied with the service
outcome
Responsiveness: How quickly do service

staff respond to customer problems,
requests and questions?
Behavior of employees: Do service staff

act in a friendly and polite manner?
Competence: Performance of the primary

service will depend on the knowledge and
competencies of the service providers
Communication: Is the service described

clearly and accurately?
Physical evidence: The company should

provide physical evidence to customers
which will assure customers that they will
be provided a good service
• Managing service productivity
Measure of relationship between the
various types of inputs that are required to
produce the service and the service output
Conflict between improving service
productivity and raising service quality
Technology can be used to improve
productivity and service quality
simultaneously

Managing Service Productivity (Contd.)
Customer involvement in production can

be increased
Important to balance supply and demand
By smoothing demand or increasing
flexibility of supply, both productivity
and service quality can be achieved

• Managing service staff
Quality of the service experience is
heavily dependent on staff-customer
interpersonal relationship
Companies need to treat their employees
well if customers have to be served well
by their employees
Nature of the job needs and appropriate
personality characteristics to be defined
sharply while selecting service staff
Managing Service Staff (Contd.)
Socialization allows the newly recruited

service professionals to experience the
culture and tasks of the organization
Maintaining a motivated workforce
Customer feedback essential to maintain
high standards of service quality
Employees of service organizations must
take pride in their jobs

POSITIONING SERVICES
• Differentiate from competition on attributes

that target customers highly value
• Entails two decisions:
Choice of target market (where to
compete)
Creation of differential advantage (how to
compete)
Positioning Services (Contd.)
• Determine important choice criteria of

customers carefully
• Most important decision of a service
organization is selecting the factors on
which it will compete
• Select a few factors and provide superlative
performances in the chosen factors
• Target marketing
• Differential advantage
THE SERVICES
MARKETING MIX

• The service
Pure services are intangible
Higher perceived risk in decision
making process
People, physical evidence and processes
provide cues about the quality of the
service
Brand name affects perceptions of service
Provide service
Marketing trials
Management wherever
by Arun Kumar and N Meenakshipossible
• Promotion
Intangible elements of service may be
difficult to communicate
Sales people should develop lists of
satisfied customers to be used in reference
selling
Word of mouth is critical to success
Acknowledge the dominant role of
personal influence in the choice process and
stimulate word of mouth communication
Promotion (Contd.)
Persuade satisfied customers to inform

others of their satisfaction
Develop materials that customers can pass
on to others
Target opinion leaders in its advertising
campaign
Encourage potential customers to talk to
current customers
Communication should also be targeted at
employees
• Price
An indicator of perceived quality

Important in matching demand and
supply
Price sensitivity key segmentation
variable

Setting fees levels:
Offset
Inducement
Divisionary
Guarantee
Predatory

• Place
Distribution channels for services are
more direct
Production and consumption is
simultaneous
New technologies permit service
companies to provide services without
customers coming to their facility
• People
Service quality is inseparable from

quality of service providers
Set standards to improve quality of
service provided by employees and monitor
their performance
Training of employees crucial
Adopt a customer-first attitude than
putting own convenience first
People (Contd.)
Employees of service organizations

have to be adept in multiple roles
Have empathy to judge the service

requirement and mood of the customer
Examine the role played by customers in

service environment
Seek to eliminate harmful interactions

• Physical evidence
The environment in which the service is
delivered
Includes any tangible goods that facilitate
the performance and communication of the
service
Strengthen cues that customers search for
to judge the quality of services

• Process
Procedures, mechanisms and flow of
activities by which a service is delivered to
customers
Control variations in services by targeting
smaller segment of customers
Process and its visibility are both
important for customers
Process should be employed only when it
is required to provide a service and not
because customers have come to expect it
SERVICE ENCOUNTERS
• A terrible ending usually dominates a

person’s recollection of an experience
• Customers who are mentally engaged in a
task do not notice how long it takes
• Customers desperately want to make sense
of unexpected events

Service Encounters (Contd.)
Study service encounters from customers’

point of view
• Finish strong
• Get the bad experience out of the way early
• Segment the pleasure, combine the pain
• Build commitment through choice
• Give people rituals and stick to them

SERVICE RECOVERY
• Well-intentioned, prompt, and apt recovery
can assuage angry customers
• Everyone in the organization must have the
skill, motivation, and authority to make
service recovery an integral part of service
operations
• Production-oriented service-delivery systems
have helped in achieving consistently high
service standards
Service Recovery (Contd.)
• Inevitable problems will still arise, by

providing for service recovery
• Good service providers cover all the costs
that a failure incurs
• Customer’s problem is an opportunity
• Companies must be responsive to customer
complaints, and encourage them to complain
• Monitor areas of the organization which are
likely to throw up problems more frequently
Service Recovery (Contd.)
• Solve customers’ problems fast because

service problems quickly escalate
• Train frontline employees and empower them
• Give employees the authority, responsibility,
and incentives to help customers in unique
ways
• Let customers know about corrective
measures taken and the improvement
achieved
INNOVATION IN SERVICES
• Difficulties in applying traditional methods of
research and development to services
• Experiments with new services are most useful
when they are conducted live , though
cautiously
• Improvements should be planned and
experimented incrementally
Innovation in Services (Contd.)
• Personnel conducting the experiments must

be motivated
• Successful experiment has to be persisted
with
• Experiment only when it can be finally
implemented
• Conducting live experiments risky and
cumbersome, but may be inevitable

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CHAPTER 20

Marketing Management by Arun Kumar and N Meenakshi

• How to position a service organization and

• The service marketing mix

• How businesses should manage service

Marketing Management by Arun Kumar and N Meenakshi

• Difficult to provide a single definition of

• Concept of service has to be understood

Marketing Management by Arun Kumar and N Meenakshi

• Service is one part of product-service mix being

• The main offering is the product but the supplier also

• Every product or service or any combination of a mix

Marketing Management by Arun Kumar and N Meenakshi

• Services impact customers more directly

• Service provider must define service very

• Promotion more challenging due to

• Same basic service can be provided in

Marketing Management by Arun Kumar and N Meenakshi

• Same service can be delivered in various

• Marketing mix conveys the positioning of a

Marketing Management by Arun Kumar and N Meenakshi

Does not understand customer requirements:

No resources: A company may understand

Marketing Management by Arun Kumar and N Meenakshi

Management’s will: A management

Exaggerated expectations: Exaggerated

Marketing Management by Arun Kumar and N Meenakshi

Reliability: Service provider should be

Credibility: Can customers trust the

Security: Can the services be used

Marketing Management by Arun Kumar and N Meenakshi

Understanding customer: If the

Responsiveness: How quickly do service

Behavior of employees: Do service staff

Competence: Performance of the primary

Communication: Is the service described

Physical evidence: The company should

Marketing Management by Arun Kumar and N Meenakshi

Customer involvement in production can

Marketing Management by Arun Kumar and N Meenakshi

Socialization allows the newly recruited

Marketing Management by Arun Kumar and N Meenakshi

• Differentiate from competition on attributes

• Determine important choice criteria of

Marketing Management by Arun Kumar and N Meenakshi

Persuade satisfied customers to inform

An indicator of perceived quality

Marketing Management by Arun Kumar and N Meenakshi

Marketing Management by Arun Kumar and N Meenakshi

Service quality is inseparable from

Employees of service organizations

Have empathy to judge the service

Examine the role played by customers in

Seek to eliminate harmful interactions

Marketing Management by Arun Kumar and N Meenakshi

Marketing Management by Arun Kumar and N Meenakshi

• A terrible ending usually dominates a

Marketing Management by Arun Kumar and N Meenakshi

Study service encounters from customers’

Marketing Management by Arun Kumar and N Meenakshi

• Inevitable problems will still arise, by

• Solve customers’ problems fast because