SERVICES MARKETING: INTEGRATING PEOPLE,

TECHNOLOGY, STRATEGY
MODULE - 2

DR. ZILLUR RAHMAN

PROFESSOR
DEPARTMENT OF MANAGEMENT STUDIES, IIT ROORKEE

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 Understanding Service Products, Consumers, and Markets
Module 1, 2, & 3: New Perspectives on Marketing in the Service Economy
Module 4, 5, & 6: Consumer Behavior in the Service Context
Module 7 & 8: Positioning Services in Competitive Markets

Applying the 4 Ps of Marketing to

Services
Managing the Customer Interface
Module 9, 10, & 11: Developing
Module 20 & 21: Designing and
Service Products Developing Customer
Managing Service Processes
Module 12 & 13: Distributing Relationships
Module 22, 23, & 24: Balancing
Services through Physical and Module 30, 31, & 32: Managing
Demand and Productive Capacity
Electronic Channels Relationships and Building Loyalty
Module 25 & 26: Crafting Service
Module 14, 15, & 16: Setting Module 33, 34, & 35: Complaint
Environment
Prices and Implementing Revenue Handling and Service Recovery
Module 27, 28, & 29: Managing
Management
People for Service Advantage
Module 17, 18, & 19: Promoting
Services and Educating Customers

Striving for Service Excellence

Module 36, 37, & 38: Improving Service Quality and Productivity
Module 39 & 40: Striving for Service Leadership & Creating the Seamless Service Firms

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NEW PERSPECTIVES ON MARKETING IN THE SERVICE
ECONOMY
MODULE - 2

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 MODULE OVERVIEW
1. Be familiar with the characteristics of services and the distinctive
marketing challenges they pose.
2. Understand the components of the traditional marketing mix
applied to services.

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OVERVIEW

Introduction to
Services Marketing

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 WHAT ARE SERVICES?
• The historical view
– Smith (1776): Services are different from goods because they are
perishable.
– Say (1803): As services are immaterial, consumption cannot be
separated from production.

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 WHAT ARE SERVICES?
• A fresh perspective: Benefits without Ownership
• According to C. Lovelock and E. Gummesson services involve a form of
rental through which customers can obtain benefits.
• (a) Payment made for using or accessing something – usually for a
defined period of time – instead of buying it outright and,
• (b) Allows participation in network systems that individuals and
organizations could not afford.

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 WHAT ARE SERVICES?
• There are five broad categories within the non ownership framework
– Rented goods services
– Defined space and place rentals
– Labor and expertise rentals
– Access to shared physical environment
– Access to and usage of systems and networks.

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 WHAT ARE SERVICES?
• Rented goods services:
These services enable customers to obtain the temporary right to use a
physical good that they prefer not to own.
Boats, fancy dress costumes
• Defined space and place rentals:
Customers obtain use of a defined portion of a larger space in a building,
vehicle, or other area.
Suite in an office building, seat in an aircraft

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 WHAT ARE SERVICES?
• Labor and expertise rentals:
Customers hire other people to perform work that they either choose not
to do for themselves (e.g., cleaning a house) or are unable to do because
they lack the necessary expertise, tools, or skills (car repair, surgery).
• Access to shared physical environment:
These environments may be located indoors or outdoors. In return for a
fee, customers rent the right to share use of the
environment with other customers.
museums, theme parks, gyms

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 WHAT ARE SERVICES?
• Access to and usage of systems and networks:
Customers rent the right to participate in a specified network such as
telecommunications, utilities, or specialized information services.

In many instances, two or more of these categories may be combined.

 When we hire a taxi, we’re hiring both a driver and a vehicle.
 If you undergo surgery, you are, in essence, hiring a skilled
team of medical personnel, as well as renting temporary
(but exclusive) use of specialized equipment at a hospital.

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 DEFINITION OF SERVICES
• Services are economic activities performed by one party to another.
Often time-based, these performances bring about desired results to
recipients, objects, or other assets.
• In exchange for money, time, and effort, service customers expect value
from access to labor, skills, expertise, goods, facilities, networks, and
systems. However, they do not normally take ownership of the physical
elements involved.

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 SERVICE PRODUCTS VS. CUSTOMER SERVICE & AFTER-
SALES SERVICE
• A firm’s market offerings are divided into core product elements and
supplementary service elements
• Need to distinguish between:
– Marketing of services – when service is the core product.
– Marketing through service – when good service
increases the value of a core physical good.

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EXAMPLES OF GOODS COMPANIES THAT ARE
EXPANDING INTO SERVICES

Boeing

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 EXAMPLES OF SERVICE INDUSTRIES
• 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
• Others
– hair styling, pest control, plumbing, lawn
maintenance, counseling services, health club

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 FOUR CATEGORIES OF SERVICES
A PROCESS PERSPECTIVE
• People processing
• Possession processing
• Mental stimulus processing
• Information processing

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FOUR CATEGORIES OF SERVICES
A PROCESS PERSPECTIVE

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 PEOPLE PROCESSING
• From ancient times, people have sought out services directed at
themselves, including transportation, food, lodging, health
restoration, or beautification.
• Here customers must physically enter the service system.
• In short, they must enter the service factory, a physical location
where people or machines (or both) create and deliver service
benefits to customers.

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 PEOPLE PROCESSING
• Implications of people processing services:
– Service production and consumption are simultaneous.
– Active cooperation of the customer is needed in the service
delivery process.
– Careful consideration of location of the service operation, the
design of service processes and the service environment, demand
and capacity management, and output from the
customer’s point of view.

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 POSSESSION PROCESSING
• Customers ask service organization to provide tangible treatment for
some physical possession-
– a house that has been invaded by insects,
– a malfunctioning elevator,
– a broken screen of a smartphone or,
– a sick pet.

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 POSSESSION PROCESSING
• Implications of possession processing services:
– Production and consumption are not necessarily simultaneous.
– Customers tend to be less involved in these services, compared to
people-processing services.

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 MENTAL STIMULUS PROCESSING
• These services touch people’s minds and have the power to shape
attitudes and influence behavior.
• Mental stimulus processing services include education,news and
information, professional advice, and some religious activities.
• Obtaining the full benefit of such services requires an investment of
time and a degree of mental effort on customer’s part.

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 MENTAL STIMULUS PROCESSING
• Implications of mental stimulus processing services:
– Customers do not have to be physically present in the service
factory. They only access the information remotely when they
need it.
– Services can be “inventoried” for consumption at a later date, or
consumed repeatedly.

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 INFORMATION PROCESSING
• Information can be processed by information and communications
technology(often referred to as ICT), and/or by professionals who use
their brains to perform information processing and packaging.
• Information is the most intangible form of service output.
• However, it can be transformed into more permanent and tangible
forms like letters, reports, books, or files in any type of format.
• Difficult to differentiate between information
processing and mental stimulus processing
services.

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 INFORMATION PROCESSING
• For example, if a stockbroker performs an analysis of a client’s
brokerage transactions, it seems like information processing.
• However, when the result of the analysis are used to make a
recommendation about the most suitable type of investment strategy
for the future, it would seem like mental stimulus processing.
• Therefore, for simplicity, we will periodically combine our coverage of
mental stimulus and information processing services under the
umbrella term of information-based services.

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 MARKETING CHALLENGES POSED BY SERVICES
• Can the marketing concepts and practices developed in
manufacturing companies be directly transferred to service
organizations where no transfer of ownership takes place?
• The answer is often “no.”
• Services tend to have different features from goods, including the
frequently cited four characteristics-
– intangibility
– heterogeneity (variability of quality)
– inseparability of production and consumption and
– perishability

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 Difference Implications Marketing-related Topics

• Most service products cannot be • Customers may be turned away or have • Smooth demand through promotions, dynamic pricing, and
inventoried to wait reservations
(i.e., output is perishable) • Work with operations to adjust capacity

• Intangible elements usually dominate • Customers cannot taste, smell, or touch • Make services tangible through emphasis on physical clues
value creation these elements and may not be able to • Employ concrete metaphors and vivid images in advertising and
(i.e., service is physically intangible) see or hear them branding
• Harder to evaluate service and
distinguish from competitors

• Services are often difficult to visualize • Customers perceive greater risk and • Educate customers to make good choices, explain what to look
and understand uncertainty for, document performance, offer guarantees
(i.e., service is mentally intangible)

• Customers may be involved in co- • Customers interact with providers’ • Develop user-friendly equipment, facilities, and systems
production (i.e., if people processing is equipment, facilities, and systems • Train customers to perform effectively; provide customer
involved, the service is inseparable) • Poor task execution by customers may support
hurt productivity, spoil the service
experience, and curtail benefits

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 Difference Implications Marketing-related Topics

• People may be part of the • Appearance, attitude and behavior of service personnel and other • Recruit, train, and reward employees to reinforce the
service experience customers can shape the experience and affect satisfaction planned service concept
• Target the right customers at the right times; shape
their behavior

• Operational inputs and • Harder to maintain consistency, reliability, and service quality or to • Set quality standards based on customer expectations;
outputs tend to vary more lower costs through higher productivity redesign product elements for simplicity and failure-
widely (i.e., services are • Difficult to shield customers from results of service failures proofing
heterogeneous) • Institute good service recovery procedures
• Automate customer-provider interactions; perform
work while customers are absent
• The time factor often Customers see time as a scarce resource to be spent wisely, dislike Find ways to compete on speed of delivery, minimize
assumes great importance wasting time waiting, want service at times that are convenient burden of waiting, offer extended service hours

• Distribution may take place • Information-based services can be delivered through electronic • Seek to create user-friendly, secure websites and free
through nonphysical channels such as the Internet or voice telecommunications, but core access by telephone
channels products involving physical activities or products cannot • Ensure that all information-based service elements are
• Channel integration is a challenge; that is to ensure consistent delivered effectively and reliably through all key
delivery of service through diverse channels, including branches, call channels
centres and websites.

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TANGIBLE-DOMINANT TO INTANGIBLE-DOMINANT

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SEARCH, EXPERIENCE, AND CREDENCE QUALITIES

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 THE 7 ‘P’S OF SERVICES MARKETING
The 4 ‘P’s
• product,
• price,
• place (or distribution), and
• promotion (or communication)
Extended Marketing Mix for Services – The 3 ‘P’s
• process,
• physical environment, and
• people
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 THE TRADITIONAL MARKETING MIX APPLIED TO
SERVICES
• Product Elements
– Service products lie at the heart of a firm’s marketing strategy.
– If poorly designed, it won’t create meaningful value for customers,
even if the rest of the 7 Ps are well executed.
– Service products consist of
• a core product that meets the customers’ primary need and
• an array of supplementary service elements (consultation,
hospitality etc.)that are mutually reinforcing, and add
value to help customer to use the core product more
effectively.

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 THE TRADITIONAL MARKETING MIX APPLIED TO
SERVICES
• Price and Other User Outlays
– Like product value, payment is very important in allowing a value
exchange to take place.

– Pricing strategy is highly dynamic, with price levels adjusted over

time according to factors like customer segment, time and place of
delivery, level of demand, and available capacity.

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 THE TRADITIONAL MARKETING MIX APPLIED TO
SERVICES
– Customers, by contrast, see price as a key part of the costs they
must incur to obtain desired benefits.
– They may go beyond just money and assess the outlays of their
time and effort
– Service marketers, therefore, must not set only prices that target
customers are willing and able to pay, but also understand — and
seek to minimize, where possible—other burdensome outlays such
as
• Additional monetary costs,
• time spent,
• unwanted mental and physical effort, and
• exposure to negative sensory experiences.

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 THE TRADITIONAL MARKETING MIX APPLIED TO
SERVICES
• Most Service Products Cannot be Inventoried
– Services involve actions or performances, they are temporary and
perishable.
– Cannot be stocked as inventory for future use.
– In periods of demand exceeds capacity, customers may be turned
away or asked to wait until later.
– Service marketers, should therefore, find ways of
smoothing demand levels to match available
capacity using dynamic pricing strategies.
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 CONCLUSION
We began this module by understanding the concept of service.
Next we discussed about the four broad categories of services based on
process perspective.
Finally we learnt about the traditional marketing mix (Product and Price)
applied to services.

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 REFERENCES

• Wirtz, J., Lovelock, C., & Chatterjee, J. (2017) Services Marketing:

People Technology Strategy, Pearson Education, Eighth Edition.
• Zeithaml, V. A., Bitner, M. J., Gremler, D. D., and Pandit, A. (2009)
Services Marketing: Integrating customer focus across the firm, Tata
McGraw-Hill Education Pvt. Ltd., Fourth Edition.
• Hoffman, K. D., & Bateson, J. E. G. (2007) Services
Marketing : Concepts, strategies, & cases, Thomson
Publication, Third Edition.

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Thank You

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