Introduction

Meaning & characteristics

To better understand what is a product and what is a service – let’s differentiate between
product and service as follows:
• Product is tangible in nature whereas service is intangible in nature.
• Products are homogeneous in nature whereas services are heterogeneous in nature.
• Products are created in the factory whereas services are created in buyer-seller
interaction.
• Production, distribution, consumption are separate and independent functions in
products whereas production, distribution, consumption takes place simultaneously in
the case of services.
• Consumers do not participate in the production of goods whereas consumers are co-
producers in service.
• Products can be stored whereas services can not be stored.
• For products transfer of ownership is possible whereas for services transfer of
ownership is not feasible.
Classification of services
• People based and equipment based services
• Personal and business services
• Presence and absence of the buyer
• For profit and non-profit services
Reasons for the growth of services sector
• Social change • Working women
• Government policies • Double income no kids
• Development of communication • Leisure time
technology • Greater life expectancy
• Globalization • Product innovations
• Product complexity • New young youth
• Life complexity • Corporate crowd
• Scarcity of resources and environment
protection
• Consumer affluence
Challenges in service sector
• Quality consistency • Service development
• Development and testing • Differentiation
• Corporate image
• Fluctuating demand
• Motivation of employees
• Pricing
• Competition
• Infrastructure
• Value
Services marketing
Service marketing is the process, practice, and strategy that promotes intangible
offerings and benefits to the customers with the aim to build up customer
satisfaction, relationship, and value. The service can be a firm’s single offering as
well as additional benefits to tangible products.
• In simple words, service marketing means doing the business of intangible
products which do not have physical entity but have quality and ability to satisfy
customers need and want. Such a product’s performance is not measured and
touched but is felt and perceived by customers which gives quantitative value to
them.
• Sectors like repair and maintenance, medical, health care, tourism, hospitality,
banking, insurance, consultancy, professional services, etc. are the sectors
involved in service marketing.

For example, in the sale of a physical product – television set to a customer the
facility regarding warranty services becomes the part of the television i.e. warranty
services are provided to the customer when he purchases a television set. Here,
services become supplementary products.
Internal Service Marketing. Internal service marketing means promoting services within
the organization i.e. between the company and its employees. It focuses on developing and
training employees to increase service productivity. It believes the employees are the core
elements to promotes service activities, they should be treated well and should be trained
how to manage customers well.
External Services Marketing. It is also called business-to-consumer (B2C) service
marketing. Here the business promotes its offerings to the target markets. The business can
use various marketing tools to attract customers and deliver its offering to provide
satisfaction and generate value. The business should focus on improving its offering as such
the competition goes on increasing.
Interactive Service Marketing. It simply means the combination of internal and external
service marketing. It focuses on building good interaction with customers by the employees
while serving them. The employees should interact and treat well to the customers, deliver
promises, get customer satisfaction and value, and ultimately add to company objectives.
Importance of service marketing
• Capital formation
• Optimum utilization of resources
• Use of environmental friendly technology
• Employment creation
• Enhancement of standard of living
Marketing mix decision for services
• 1) Product
• The product in service marketing mix is intangible in nature. Like physical
products such as a soap or a detergent, service products cannot be measured.
Tourism industry or the education industry can be an excellent example. At the
same time service products are heterogenous, perishable and cannot be owned.
• The service product thus has to be designed with care. Generally service blue
printing is done to define the service product. For example – a restaurant blue
print will be prepared before establishing a restaurant business. This service blue
print defines exactly how the product (in this case the restaurant) is going to be.
• 2) Place
• Place in case of services determine where is the service product going to be located. 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. Similarly a software company will
be better placed in a business hub with a lot of companies nearby rather than being placed in a
town or rural area.
• 3) Promotion
• Promotions have become a critical factor in the service marketing mix. Services are easy to be
duplicated and hence it is generally the brand which sets a service apart from its counterpart.
You will find a lot of banks and telecom companies promoting themselves rigorously.
• Why is that? It is because competition in this service sector is generally high and promotions is
necessary to survive. Thus banks, IT companies, and dotcoms place themselves above the rest
by advertising or promotions.
• 4) Pricing
• Pricing in case of services is rather more difficult than in case of products. If you
were a restaurant owner, you can price people only for the food you are serving.
But then who will pay for the nice ambiance you have built up for your
customers? Who will pay for the band you have for music?
• Thus these elements have to be taken into consideration while costing. Generally
service pricing involves taking into consideration labor, material cost and
overhead costs. By adding a profit mark up you get your final service pricing. You
can also read about pricing strategies.
• Here on we start towards the extended service marketing mix.
• 5) People
• People is one of the elements of service marketing mix. People define a service. If
you have an IT company, your software engineers define you. If you have a
restaurant, your chef and service staff defines you. If you are into banking,
employees in your branch and their behavior towards customers defines you. In
case of service marketing, people can make or break an organization.
• Thus many companies nowadays are involved into specially getting their staff
trained in interpersonal skills and customer service with a focus towards
customer satisfaction. In fact many companies have to undergo accreditation to
show that their staff is better than the rest. Definitely a USP in case of services.
• 6) Process
• Service process is the way in which a service is delivered to the end customer.
Lets take the example of two very good companies – Mcdonalds and Fedex. Both
the companies thrive on their quick service and the reason they can do that is their
confidence on their processes.
• On top of it, the demand of these services is such that they have to deliver
optimally without a loss in quality. Thus the process of a service company in
delivering its product is of utmost importance. 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.
• 7) Physical Evidence
• The last element in the service marketing mix is a very important element. As said
before, services are intangible in nature. However, to create a better
customer experience tangible elements are also delivered with the service. Take an
example of a restaurant which has only chairs and tables and good food, or a
restaurant which has ambient lighting, nice music along with good seating
arrangement and this also serves good food. Which one will you prefer? The one
with the nice ambience. That’s physical evidence.
• Several times, physical evidence is used as a differentiator in service marketing.
Imagine a private hospital and a government hospital. A private hospital will have
plush offices and well dressed staff. Same cannot be said for a government
hospital. Thus physical evidence acts as a differentiator.