Services Marketing

Unit 1 — Detailed Study Notes

Introduction to Services · Characteristics · Classification

Services Market · Marketing of Services · Growth of Services

Types of Services · Customer Expectations · Need for Services

Marketing

Subject Services Marketing

Unit Unit 1

Topics 9 Core Topics

Level Beginner Friendly — Simple English

 Topic 1 — Introduction to Services

What is a Service?

A SERVICE is an activity or benefit that one party can offer to another. It is essentially
intangible (cannot be touched or held) and does not result in the ownership of anything.
The production of a service may or may not be linked to a physical product.

In simple words — when you go to a doctor, get a haircut, ride a bus, watch a movie at a cinema
hall, or use internet banking, you are consuming a SERVICE. You get the benefit of the activity, but
there is no physical object you take home.

Example: A Zomato delivery is a service. A school teacher teaching you is a service. An Ola cab ride
is a service. A doctor's consultation is a service.

Service vs Product — The Core Difference

Products are physical goods — you can touch, feel, store and return them. Services are activities —
you experience them but cannot touch or store them.

Basis Product Service

Nature Tangible (can touch) Intangible (cannot touch)

Production Made first, sold later Made and used at same time

Storage Can be stored Cannot be stored

Return Can be returned Cannot be returned

Ownership Transfers to buyer No transfer of ownership

Example Mobile phone, Book, Car Doctor visit, Haircut, Bus ride

Topic 2 — Characteristics of Services (IIVP)

Services have four unique features that make them very different from products. These four features
are often called the IIVP characteristics:

1. Intangibility

Services CANNOT be seen, touched, smelled, tasted or heard before they are purchased. You
cannot physically examine a service the way you can a product.

Example: You cannot 'see' a haircut before it is done. You cannot 'feel' a bank's financial advice
before taking it. A patient cannot see a doctor's skill before the treatment.
 Marketing Implication: To reduce uncertainty, service providers must show physical evidence of quality —
like clean hospitals, well-dressed staff, certificates on walls, and positive reviews.

2. Inseparability

Services are produced and consumed at the SAME TIME. You cannot separate the creation of a
service from its consumption. The service provider and customer must both be present.

Example: When a barber cuts your hair — the cutting (production) and you getting the haircut
(consumption) happen together at the same moment. An Ola driver and passenger are both part of
the service.

Marketing Implication: The quality of service depends heavily on the person providing it. So training and
behavior of employees is very important in services marketing.

3. Variability (Heterogeneity)

Services are NEVER exactly the same every time. The quality can vary depending on who
provides the service, when it is provided, where it is provided, and to whom it is provided.

Example: The same doctor may give a slightly different consultation to two different patients. A chef
in a restaurant may cook a dish slightly differently on different days.

Marketing Implication: To manage variability, companies invest in staff training, standard operating
procedures (SOPs), and quality control systems.

4. Perishability

Services CANNOT be stored, saved, resold or returned. An unused service capacity is lost forever.
This is called perishability.

Example: If a flight takes off with 50 empty seats, those seats cannot be stored and sold tomorrow. If
a cinema hall is empty during the 6 PM show, those empty seats are 'lost' revenue.

Marketing Implication: Service firms use strategies like off-peak pricing (cheap tickets in non-busy hours),
advance booking systems, and reservation management to handle perishability.

Memory Tip: IIVP = Intangibility · Inseparability · variability · Perishability

Topic 3 — Classification of Services

Services can be classified (grouped) in many different ways based on their nature, who uses them,
and how they are delivered.

Type of Service Description Examples

Used by companies and organisations for Banking, Insurance, Courier,

Business Services
their operations Advertising, Consulting
 Salons, Laundry, Coaching classes,
Personal Services Used by individual people for personal needs
Personal trainers

Social / Public Provided by government or NGOs for public Public hospitals, Government schools,
Services welfare Police, Fire brigade

Infrastructure Basic utility services that support everyday Electricity, Water supply, Internet, Gas
Services life connections

Highly skilled, expert-based services Doctors, Lawyers, Chartered

Professional Services
requiring qualifications Accountants, Architects

Entertainment Cinema, Theme parks, OTT platforms,

Services for fun, leisure and recreation
Services Sports clubs

Hotels, Airlines, Travel agents,

Tourism & Hospitality Services related to travel, stay and food
Restaurants

Services related to money and investment Banks, Mutual funds, Stock brokers,
Financial Services
management ATMs

Classification by Lovelock (Academic Classification)

Scholar Christopher Lovelock classified services based on two dimensions: (a) Who or what is the
direct recipient of the service, and (b) What is the nature of the service act?

Service Act People Things/Possessions

Healthcare, Transport, Restaurant, Freight transport, Repair &

Tangible Actions
Hairdressing maintenance, Dry cleaning

Education, Broadcasting, Information Banking, Insurance, Accounting,

Intangible Actions
services, Consulting Legal services
 Topic 4 — Understanding the Services Market

The services market is a marketplace where service providers (sellers) and customers (buyers)
come together. Understanding this market requires understanding its structure, players, and the
unique challenges it presents.

Key Players in the Services Market

The organisation or individual who creates Eg: Doctor, Bank, School,
Service Provider
and delivers the service. Airline, Restaurant

Customer / The individual or organisation that receives Eg: Patient, Account holder,
Consumer and uses the service. Student, Passenger, Diner

Eg: Hospital, Bank branch,

Service The physical setting where the service is
Classroom, Aircraft,
Environment delivered — also called Servicescape.
Restaurant

Eg: Bank's IT team,

People behind the scenes who help deliver
Support Staff Hospital's administrative staff,
the service.
Airline ground crew

The Services Marketing Triangle

In services, there is a special three-way relationship that must be managed. This is called the
Services Marketing Triangle:

Relationship Type of Marketing What it Means

Setting promises through advertising, branding

Company → Employees External Marketing
and pricing

Keeping promises through face-to-face service

Employees → Customers Interactive Marketing
delivery

Enabling promises through training, motivation

Company → Employees Internal Marketing
and support

Example: A bank (company) trains its tellers (employees) through internal marketing. It advertises
low loan rates to customers (external marketing). When the teller helps the customer at the counter
— that is interactive marketing.

Topic 5 — Marketing Services — The 7 Ps

Ordinary product marketing uses 4 Ps (Product, Price, Place, Promotion). But because services are
special, they need 3 extra Ps. So services use the 7 Ps of Marketing.

1. Product (Service)

The actual service being offered — its features, quality and benefits.

Example: A hospital's product is healthcare — surgeries, diagnostics, consultations, medicine.

2. Price

The amount charged for the service. Pricing in services is tricky because the customer pays before
knowing the full quality.

Example: A lawyer charges Rs.5,000 per hour. An airline has peak and off-peak fares.

3. Place

Where and how the service is delivered to the customer. Since services are inseparable, place
matters a lot.

Example: Bank branches, ATMs, mobile banking app — all are 'places' where banking services are
delivered.

4. Promotion

How the service is communicated and advertised to attract customers. Includes ads, word of
mouth, testimonials.

Example: A hospital showing patient testimonials on TV is using promotion to build trust.

5. People

All human actors — employees, customer service staff, even other customers — who influence the
service experience.

Example: The doctor's bedside manner, the receptionist's politeness, the waiter's speed — all are
'people' elements.

6. Process

The actual procedures, mechanisms and flow of activities by which the service is delivered.

Example: Booking an Ola cab: open app → enter destination → cab assigned → ride → payment →
rating. Each step is the process.

7. Physical Evidence

The environment in which the service is delivered and any tangible cues that help customers
evaluate service quality.
 Example: Clean hospital rooms, a hotel's lobby design, a restaurant's ambiance — these are physical
evidence.

Memory Tip: 7 Ps = Product · Price · Place · Promotion · People · Process · Physical Evidence
 Topic 6 — Reasons for Growth of the Services Sector

The services sector is the fastest-growing sector in the world economy. In India, services contribute
over 55% of GDP. Here are the key reasons for this massive growth:

Reason Explanation

As people earn more, they spend more on services like travel, dining out, gyms,
Rising Income Levels
beauty salons, and entertainment — not just basic necessities.

Rapid migration to cities creates demand for services like transport, housing,
Urbanisation
banking, schools, hospitals, shopping malls and restaurants.

Technology & The internet and smartphones created entirely new services — Swiggy, Zomato,
Digitalisation Ola, Uber, Netflix, PhonePe, Paytm, Amazon Prime.

Working professionals and nuclear families don't have time to cook, clean or repair
Busy Modern Lifestyles
things — they outsource these tasks to service providers.

Opening of borders allowed international companies to bring IT services, BPO,

Globalisation
consulting, and financial services to countries like India.

Governments promote education, healthcare, banking and public transport, driving

Government Policies
growth in social and infrastructure services.

Changing Consumer People now value experiences (travel, concerts, dining, adventure sports) more than
Preferences owning more physical things.

Education & Healthcare Growing population and awareness created massive demand for schools, colleges,
Boom hospitals, clinics and wellness centres.

Growth of SMEs & Small businesses and startups need accounting, legal, HR, marketing, and IT
Startups services — boosting the B2B services market.

Large companies outsource non-core activities (payroll, IT, security, cleaning) to

Outsourcing Culture
specialised service firms, creating a huge outsourcing industry.

Example: India's IT sector — companies like TCS, Infosys, Wipro, and HCL — earns over $200
billion per year by providing software services to companies in USA, UK, Europe and beyond. This is
a perfect example of how the services sector has grown with technology and globalisation.

Topic 7 — Types of Services

Services can be categorised in multiple ways. Here are the most commonly used frameworks for
classifying types of services:
A. Based on Market Segment (Who Uses the Service)

Segment Description Examples

Offered to individual consumers / Hospitals, Schools, Salons, Hotels,

Consumer Services
households Restaurants

Business / Industrial Consulting, IT services, Advertising,

Offered to businesses and organisations
Services Logistics

B. Based on Degree of Labour Intensity

Type Description Examples

Heavily dependent on human effort and Teaching, Surgery, Psychotherapy,

People-Based Services
skills Consulting

Equipment-Based ATMs, Self-checkout, Online

Rely mainly on machines and technology
Services streaming, Vending machines

C. Based on Profit Orientation

For-Profit Services: Run by private companies to earn money. Eg — Private hospitals, Airlines,
Hotels, Telecom companies.
Non-Profit Services: Run by government or NGOs for public benefit, not profit. Eg —
Government schools, Public hospitals, NGO clinics, Libraries.

Topic 8 — Customer Expectations of Services

When a customer uses a service, they come with expectations in their mind. If the actual service
meets or exceeds these expectations, the customer is satisfied. If it falls below expectations, they
are disappointed and may not return.

The RATER Model — 5 Dimensions of Customer Expectations

Developed by Parasuraman, Zeithaml and Berry, the RATER model identifies five key service quality
dimensions:

R — Reliability

Ability to perform the promised service dependably and accurately every single time.

Example: A courier company delivering packages on the exact promised date, every time.

A — Assurance

Knowledge, courtesy, and ability of employees to inspire trust and confidence in customers.
 Example: A doctor who explains the diagnosis clearly and confidently inspires trust in patients.

T — Tangibles

Appearance of physical facilities, equipment, personnel, and communication materials.

Example: A clean, well-furnished waiting room and neatly dressed staff at a bank.

E — Empathy

Caring, individualised attention that the service firm provides to its customers.

Example: A nurse who remembers a patient's name and asks about their family shows empathy.

R — Responsiveness

Willingness to help customers and provide prompt, quick service.

Example: A customer care executive who picks up the call in 2 rings and resolves the issue
immediately.

Memory Tip: RATER = Reliability · Assurance · Tangibles · Empathy · Responsiveness

Levels of Customer Expectations

Customers don't have just one level of expectation — they have a range, described as the Zone of
Tolerance:

Level Description Example

The level of service the customer hopes A patient hopes the doctor will spend
Desired Service
and wishes to receive 20 minutes explaining the diagnosis

The range between desired and adequate The patient accepts 10-15 minutes
Zone of Tolerance
service the customer accepts as also okay

The minimum level the customer will accept Below 5 minutes with no explanation
Adequate Service
before feeling dissatisfied = customer unhappy
 Topic 9 — Need for Services Marketing

Services marketing is not just about selling — it is about building trust, managing expectations,
retaining customers, and consistently delivering quality. Here is why services marketing is
necessary:

Reason Why It Matters

Since services cannot be seen before purchase, marketing must create

Intangibility Challenge
confidence through testimonials, reviews, brand image, and visible evidence.

Customers risk money on something they haven't experienced yet. Services

Building Trust
marketing reduces this perceived risk through clear communication.

Differentiating from Many service firms offer similar services. Marketing helps highlight unique
Competitors advantages — better staff, faster delivery, lower price.

Managing Customer Marketing sets realistic promises. If customers expect too much and get less,
Expectations they're unhappy. Good marketing aligns expectations with reality.

Without promotion and marketing, even the best service provider will remain
Attracting New Customers
unknown. Marketing drives awareness and footfall.

Retaining Existing It costs 5x more to acquire a new customer than to retain an existing one.
Customers Services marketing includes loyalty programs, after-service care, and follow-ups.

Managing Demand Services face peak and off-peak demand (eg: more flights on weekends).
Fluctuations Marketing strategies like discounts and promotions help smooth out demand.

Employees are the face of the service. Marketing helps motivate and train staff to
Internal Marketing to Staff
deliver consistently excellent service.

Word of Mouth Satisfied customers talk. Services marketing creates experiences worth talking
Amplification about, generating powerful word-of-mouth promotion.

Adapting to Changing Customer preferences evolve. Marketing research helps service firms
Needs understand and adapt to changing market needs.

Example: A brilliant doctor who doesn't advertise or manage his reputation will have an empty clinic.
A mediocre doctor with great marketing, good reviews, and a well-designed clinic will be fully booked!
This shows why services marketing is absolutely essential.

Quick Revision Summary — Unit 1 at a Glance

Topic Key Points to Remember

Service Definition Intangible activity / benefit offered by one party to another. No ownership transfer.

4 Characteristics IIVP — Intangibility, Inseparability, Variability, Perishability

Business, Personal, Social, Infrastructure, Professional, Entertainment, Tourism,

Classification
Financial

3 players: Provider, Customer, Environment. Services Marketing Triangle: External /

Services Market
Internal / Interactive

7 Ps of Services Product, Price, Place, Promotion, People, Process, Physical Evidence

Growth Reasons Rising incomes, Technology, Urbanisation, Globalisation, Busy lifestyles, Govt policy

Types of Services Consumer vs Business, People-based vs Equipment-based, For-profit vs Non-profit

Reliability, Assurance, Tangibles, Empathy, Responsiveness — 5 dimensions of

RATER Model
service quality

Trust building, differentiation, retaining customers, managing expectations, word of

Need for Mktg
mouth

End of Unit 1 — Services Marketing