ASSIGNMENT

SERVICE MARKETING

Q1- Define Services. Explain the characteristics of services. How can you
differentiate between goods and services?

Q2-Write in detail about 7 P's of services marketing with suitable example. And
explain service flower?

Q3-What are the main approaches adopted while pricing the services? Explain the
factors affecting pricing decision of services?

Submitted by:- Shikha gupta

18 MBAK 78
GL1052
QUESTION: Define Services. Explain the characteristics of services. How can
you differentiate between goods and services?

Service is the integral part of human life in modern day. It combine the activities which are non-
physical, intangible & does not result in ownership. It is based on relationship and value. 
A service is an act, deed, performance or a rendering offered by one person to another.
Services Marketing stands for the marketing of services as against substantial products. Services
are genetically, absorbed simultaneously at the time of their production, cannot be stored, saved
or resold once they have been used and service offerings are unique and cannot be exactly
repeated even by the same service provider.

“A service is an act of performance 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.” - Philip Kotler
Examples-

 Health Care hospital, medical practice, dentistry, eye care

 Professional Services accounting, legal, architectural
 Financial Services banking, investment advising, insurance
 Hospitality restaurant, hotel/motel, bed & breakfast
ski resort, rafting
 Travel airline, travel agency, theme park
 Others hair styling, pest control, plumbing, lawn maintenance,
counseling services, health club, interior design
As also due to covid 19, our economy is also shifting more towards digital era as if most of the
things are done online only, for example prior we buy books which where in the form of goods
but now we are purchasing online digital or audio book which is totally intangible in a form of
service.

Characteristics of Services -
Some of the characteristics of service are as-
 Intangibility- Services are intangible and do not have a physical existence, which means
people cannot, touch or see services. This is most defining feature of a service and that which
primarily differentiates it from a product.
Example : Banking services, services of bank can be felt as taking loan, insurance, online
transactions etc it can’t be seen or touched as they don’t have any physical existence so
service is intangible.

 Inseparability- This refers to the fact that services are generated and consumed within the
same time frame. Services cannot be separated from the service provider. Services are unique
because they are usually provided and consumed at the same time in the same location.
Example: Doctors & patient, the time when the patient visit to the doctor at the same time
service can be experienced as doctor can only treat patient when his patient is present at
the same time as the service can not be inseparable.

 Variability- There can be a lot of differences in service experience with customers and
employees when they interact during the service delivery. The quality of the service may
vary depending on who provides it, as well as when and how it is provided.
Example: Experience of bus travelers, monitor customer satisfaction by filling forms
while on flight.

 Perishability- Services cannot be stored or inventoried. As services are performances they

cannot be stored. Services perish as soon as they are used. A buyer cannot save the massage
experience bought from a service provider. Services last for a specific time and cannot be
stored like a product for later use.
Example: Train that leaves the railway station, unsold concert tickets

 Lack of ownership and transferability- A physical product like a Television can be owned
and transferred to another owner. But a haircut service bought from a barber cannot be
owned and transferred to another buyer.
Example:  holiday where we simply use the services of the holiday provider as
opposed to taking physical possession of a product.

 Simultaneity- Services cannot move through channels of distribution and cannot be

delivered to the potential customers and user. Either users are brought to the services or
providers go to the user. It is right to say that services have limited geographical area.
Difference between goods and services

Goods: goods are materials that satisfy human wants and provide utility. Goods are consumable
products with physical characteristics (shape, size, weight, etc.) that provide some utility.
Example :- laptop, mobile phones, television,

Service: Services are the intangible economic product that is provided by a person on the other
person’s demand. It is an activity carried out for someone else. Services are amenities, facilities,
benefits or assistance provided by to a consumer by another person, and cannot be separated
from their provider, unlike with goods. Example :- internet, banking, hospital, hotel

Goods and services are the most basic products of an economy. Goods can be defined as tangible
consumable items while services describe tasks that are performed by individuals for the benefit
of someone else (e.g. teaching). However, most goods are not pure goods or pure services, they
lie somewhere in between. To locate products in this continuum we can look at a number of
characteristics that distinguish goods and services: tangibility, ownership, customer involvement,
inventories, and timing.

-Goods are first produced, then stored, and finally sold and consumed, services are first
sold, then produced and consumed simultaneously.
 GOODS SERVICES
Goods are produced. Services are performed.
 NATURE
Goods are tangible and homogeneous Services are intangible and heterogeneous
in nature. in nature.
 ESSENCE
Goods are physical things and Services are more like a process.
involves production.
 CORE VALUE
Core value of a good is produced in a Core value of a service is produced at the
firm or factory or manufacturing unit. time of buyer and seller interaction.

 PARTICIPATION
Customers don't participate in Customers participate in the production
production process of goods. process of services.

 INVENTORY
Goods can be kept in stock for future Services cannot be kept in stock,
sales, inventory of goods is possible. inventory of services is not possible.

 OWNERSHIP
Transfer of ownership of the title is Transfer of ownership of the title is not
possible in case of goods. possible in case of services.

PRODUCTION & CONSUMPTION
In case of goods, production and In case of services, production,
distribution can be separated from distribution and consumption occur at a
consumption. same point of time.
 QUALITY
The quality of a product can be The quality of a service cannot be
measured and compared with other measured.
products.
 RETURNS
Goods purchased can be returned if Services bought cannot be returned but in
not satisfied and can get refund. some cases can get refund of money.

VARIABILITY
Goods are identical . Services are diversified it is dynamic &
customized according to the customers
QUESTION: Write in detail about 7 P's of services marketing with suitable
example. And explain service flower?

1. Product
Product is your core offering. This is “the thing” that will fulfill the needs of your customer.  In
case of services, the ‘product’ is intangible, heterogeneous and perishable. If you want to market
your service successfully the first step is to define what it is you’re actually selling. It must be
more customized & could easily be adjusted and tailored to each purchaser.  Hence particular
care has to be taken in designing the service offering.
Example: flights in the case of an airline or rooms in the case of a hotel
2. Pricing
Pricing is an important element of successful marketing. Pricing should be done after proper
analysis as if you Charge too much, you might struggle to find customers, pricing too low may
end up selling yourself short as well as earning a reputation for being cheap. Getting the balance
right can be tricky & should be focused on. There are number of things which must be
considered while pricing any services like market rates, your level of expertise and the benefit to
the client as well as your overheads, paying employees and any other expenses.
Example: In the case of our luxury hotel, the price will vary according to room size.
3. Place
Place often offers a different side of value (utility) to the customer. Since service delivery is
concurrent with its production and cannot be stored or transported, the location of the service
product assumes importance. Service providers have to give special thought as to where the
service is provided. Place in case of services determine where is the service product going to be
located. Place utility is important to evaluate, for strategizing on the other 6 Ps.
Example: 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.
4. People

People are crucial in service delivery. They are a defining factor in a service delivery process,
since a service is inseparable from the person providing it., ‘people’ include people who are
directly or indirectly involved in the trade of the product or service. These are mainly customer
contact employees (contact centre employees, representatives, account managers, etc.),
customers, personnel and management. It is mainly the customer contact employees who are the
face of the organization and they translate the quality into a service.

Example: a restaurant is known as much for its food as for the service provided by its staff.
Consequently, customer service training for staff has become a top priority for many
organizations today.

5. Physical Evidence
Physical evidence affects the customer’s satisfaction. It is within the service marketing mix
which refers to an environment in which a service come from an interaction between an
company and a customer which is combined with a tangible commodity. The physical evidence
includes a representation of a service for instance brochures, company stationery, business cards,
reports, company website, etc. So as whatever physical evidence they combine with a particular
service it plays a major role as if it enhance the satisfaction level of any customer.

Example: hotel, the design, furnishing, lighting and decoration of a hotel as well as the
appearance and the attitudes of the employees have a certain influence on the quality of the
service and customer experience.

6. Process
Processes are important to deliver a quality service. Service process is the way in which a service
is delivered to the end customer. 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. Thus the process of a service company in delivering
its product is of utmost importance.
Example: Lets take the example of Mcdonalds they thrive on their quick service and the reason
they can do that is their confidence on their processes.

7. Promotion
Promotions have become a critical factor in the service marketing. Since a service offering can
be easily replicated, promotion becomes crucial in differentiating a service offering in the mind
if the consumer. Services are easy to be duplicated and hence it is generally the brand which sets
a service apart from its counterpart .Service providers offer identical services such as airlines or
banks and insurance companies invest heavily in advertising their services so that they can show
how much they differ from their competitors & tries to be unique. This is crucial in attracting
customers in a segment where the services providers have nearly identical offerings.

Example: Using celebrity endorsements to create trust in the product. Currently Aishwarya Rai,
Priyanka Chopra, Alia, katrina Kaif and Asin Thottumkal are the brand ambassadors of Lux.

SERVICE FLOWER
Service flower is a visual framework for understanding the supplementary service elements that
surround and add value to the core product. It was introduced by Christopher Lovelock
distinguishes between facilitating and enhancing supplementary services. These different
supplementary services can be classified into eight petals. the dimensions of the flower of
services appeared to be influential on the satisfaction of customers which included (Information,
Order Taking, Consultation, Hospitality, Billing Payment) while two dimensions were found to
be not influential (Exception, Safe Keeping).

Below is a explaination of flower of services with an example of Hotel Service.

“Core and supplementary services are generally referred to as the Flower of Service and can help
firms to improve their service levels and overall client satisfaction – if understood.”
Core product:- Guest rooms or compartments, Superior Room, Luxury Room, Deluxe Room,
Luxury Suite, Royal Suite.
 Facilitating supplementary services are either needed for service delivery, or help in the
use of the core product.
1. Information
To obtain full value from any service experience, customers need relevant information New
customers and prospects are especially in need of information. customers may want
documentation of what has already taken place, such as confirmation of reservations, receipts
and tickets, and monthly summaries of account activity. Companies should make sure the
information they provide is both timely and accurate; if it's not, customers may be annoyed or
inconvenienced. Information may sometimes be required by law. These include conditions of
sale and use, warnings, reminders, and notification of changes.
Example- Direction to service site, Library Tours and excursions desk, Radio, Scheduled service
hours, Price & Reminders.
2. Order Taking
Once customers are ready to buy, companies must have effective supplementary service
processes in place to handle applications, orders, and reservations. The process of order taking
should be polite, fast, and accurate so that customers do not waste time and endure unnecessary
mental or physical effort. Banks, insurance companies, and utilities require prospective
customers to go through an application process designed to gather relevant information and to
screen out those who do not meet basic enrollment criteria (like a bad credit record or serious
health problems.
Example- Reservations, Applications, Bicycles on rent, writing table & comfortable couch
Billing Payment, reserving pool service
3. Payment
A system that includes a set of rules, institutions, and mechanisms, which are used to carry out
transfers of funds to fulfill an obligation arising from an economic activity. The billing requires
the customer to take payment action. customers expect ease and convenience of payment,
including credit, wherever they make their purchases.
Example- Foreign currency exchange & Self – services
4. Billing
Billing is common to almost all services. Customers usually expect bills to be clear. Billing
should also be timely, because it encourages people to make payment faster. It create trust &
helps to track record easily with the help of bill payments.
Example- Self-billing, VISA cards, Verbal statements, Machine display & Invoices
 Enhancing supplementary services add extra value for the customer. These different
supplementary services can be classified into one of the following eight clusters.
1. Consultation
Consultation is an enhancing supplementary service that involves a dialog to identify customer
requirements and develop a personalized solution. provides examples of several supplementary
services in the consultation category. At its simplest, consultation consists of immediate advice
from a knowledgeable service person in response to the request:
Example- Tutoring, hour room service, Mini bar & Doctor on call etc.
2. Hospitality
This service ideally reflects the pleasure of meeting new customers and greeting old customers
when they return in other words this service is a service used by companies to create a friendly
atmosphere for customers. Manners and considerations for customer needs apply to face-to-face
meetings and telephone interactions. Well-managed businesses try, at least in small ways, to
ensure that their employees treat customers as guests.
Example- Greeting, Valet parking & Wheel chair
3. Safe Keeping
While visiting a service site, customers often want assistance with their personal possessions. In
fact, unless certain safekeeping services are provided (like safe and convenient parking for their
cars), some customers may not come at all. Also Safekeeping relates to keeping clients’ records
safe, private and confidential. If you are unable to do this, clients will completely loose trust in
you and your staff.
Example- Eco toilets, Porter service & Closet accessible for bathroom
4. Exception
Exceptions involve supplementary services that fall outside the routine of normal service
delivery. Well-defined procedures make it easier for employees to respond effectively. A flexible
approach to exceptions is generally a good idea because it reflects responsiveness to customer
needs. On the other hand, too many exceptions may compromise safety, negatively impact other
customers, and overburden employees. Managers need to keep an eye on the level of exception
requests. Some exceptions are Handling of complaints, suggestions, compliments, Problem
solving, Special requests.
Example- Water polo , Boat Rides, Babysitting, Children's menus, Conference Centre ,Gym,
Internet, Spa & Shopping arcade etc.
Also, a good example of flower of service approach, from the Internet business, is Google.
QUESTION: What are the main approaches adopted while pricing the
services? Explain the factors affecting pricing decision of services?

PRICE
The money claimed against the offered product or service in the market is called price. In other
words the value exchanged for use of the benefits of a certain product or service by the
customers is called price of that product or service.
Main approaches which are adopted while pricing the services are:-

 Cost based pricing

Price = Direct costs + Overhead costs + Profit margin
It refers to a pricing method in which some percentage of desired profit margins is added to the
cost of the product to obtain the final price. The service organization computes the cost of
services by summing up material, labor and overhead expenses and adds a percentage of profit. It
is also called cost-plus pricing.
-Mark up pricing:- In mark up pricing, the selling price is fixed by adding a margin to the cost
price of the product. Which makes the price of service higher based on the assumption that
demand cannot be known accurately but costs are known. The objective of following mark up
pricing is to maximize profits in the short and medium run.
-Absorption cost pricing:- it is called as full cost pricing method where various components of
manufacturing such as variable costs, fixed costs, selling and administering the service are
worked out. All these costs are added and required margin of profit is also included.
-Marginal cost pricing:-the basic objective here is maximizing the contribution towards fixed
cost. It is a flexible approach for realizing fixed costs through different service products.

 Competition based pricing

Competition-based pricing refers to a method in which an organization considers the prices of

competitors’ service to set the prices of its own service or products. The organization may charge
higher, lower, or equal prices as compared to the prices of its competitors.
Example: Aviation industry

 Value based pricing

Demand-based pricing or value based refers to a pricing method in which the price of a service
or product is finalized according to its demand. If the demand of a service or product is more, an
organization prefers to set high prices for products to gain profit; whereas, if the demand of a
service or product is less, the low prices are charged to attract the customers.
Example: Travel industries
Factors affecting pricing decision of services

A. Internal factors
Internal factors are those factors that are related to the internal environment of the business.

 Organizational Factors:
Generally, the top management has full authority for framing pricing objectives and policies.
Some firms allow workers’ participation in decision making and therefore in such firms, all
the employees give their views and suggestions for the pricing policy. This is helpful to the
firm if the firm has several products, requiring frequent pricing decisions and where prices
differ in different markets.

 Marketing Mix:
Price, product, promotion and place are the four ‘p’s of a marketing mix. The pricing policy
of a firm must consider the other components of a marketing mix as well, because these
factors are closely related. Moreover, these factors will change according to changing market
conditions and will be different for each market. Thus, marketing research and the marketing
information system can be utilized to form the appropriate pricing policy.

 Product Differentiation:
The price of the product also depends upon the characteristics of the product. If a product is
different from its competitive products, with features such as a new style, design, package,
etc., then it can fetch a higher price in the market.

 Objectives of the Firm:

A firm may have various objectives and pricing contributes its share in achieving such goals.
Pricing policy should be established only after proper considerations of the objectives of the
 firm. Those businesses that have kept clear objectives feel convenience in setting an effective
price for their products or services, because their prices are built on the ground of stated
objectives.
 Cost of the product:
Pricing decisions are based on the cost production. If a product is priced less than the cost of
production, the firm has to suffer the loss. But the cost of production can be reduced, by co-
ordinating the activities of production properly, the firm can reduce the price accordingly
B. External Factors:

External factors are those factors which are uncontrollable & are related to the external
environment of business

 Demand:
The market demand for a product or service obviously has a big impact on pricing. Since
demand is affected by factors like, number and size of competitors, the prospective buyers,
their capacity and willingness to pay, their preference etc. are taken into account while fixing
the price
 Competition:
The impact of competition is more pronounced than in the earlier days. The market is flooded
with too many products, both Indian and foreign. The number, size and pricing strategy,
followed by competitors have a significant role to play in the pricing decision. If the product
cannot be differentiated with special features, a firm cannot charge a higher price than that of
its competitors.

 Suppliers:
Suppliers of raw materials and other goods can have a significant effect on the price of a
product. They supply the required items of production to the firm. As already pointed out, the
firm can reduce the price, if it can reduce the cost of production. If not, the usual tendency is
to charge the increased cost of production to the consumer.

 Economic Conditions:
The inflationary or deflationary tendency affects pricing. In recession period, the prices are
reduced to maintain the level of turnover. On the other hand, the prices are increased in boom
period or in inflation to cover the increasing cost of production and distribution. To meet the
changes in demand, price etc.

 Buyers:
The various consumers and businesses that buy a company’s products or services may have
an influence in the pricing decision. As the buyers are one who buys product or service from
the market so it is obvious that there must different type of buyers who purchase different
 services, so there purchasing decision is mostly influenced by the pricing of a service
therefore buyers is a important factor which affects the pricing decision.
 Government:
The prices cannot be fixed too higher, as government keeps a close watch on pricing in the
private sector. The government has the power to regulate the activities of business firms, so
that they do not charge high prices and don’t indulge in anti-social activities. The
government does this by passing various acts. For example- the MRTP Act, Consumer
Protection Act, etc.
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