Notes on Introduction to Services Marketing

Meaning and Definition

  • A service is a product of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in ownership.
  • Service definitions vary but converge on: intangibility, involvement of people/machines, and value creation without transfer of ownership.
  • Key definitions (summarized):
    • AMA: Services are activities/benefits provided in connection with the sale of goods.
    • Grönroos: An activity or series of activities of intangible nature solving customer problems.
    • Zeithaml & Bitner: Deeds, processes, performances; or intangible activities performed to create value perceptions.
  • Philip Kotler: A service is an act or performance that is intangible and may not be tied to a physical product.

Distinctive Characteristics of Services

  • 1) Intangibility: Services cannot be seen, touched, tasted, heard, or smelled before purchase.
  • 2) Perishability: Services cannot be stored; unused capacity is an economic waste.
  • 3) Inseparability: Services are produced and consumed simultaneously; hard to separate service from provider.
  • 4) Variability/Heterogeneity: Quality varies; standardization is difficult.
  • 5) Ownership: No transfer of ownership; customers experience but do not own the service.
  • 6) Simultaneity: Production and consumption occur at the same time, often in a limited geographic area.
  • 7) Quality Measurement: Difficult to measure; focus on service level and overall experience.
  • 8) Demand Nature: Demand is fluctuating; flexibility in capacity is needed.

Implications of Characteristics for Marketing

  • Intangibility: hard to assess quality; evidence-based marketing is essential; emphasize brand image, tangible cues, and service evidence.
  • Perishability: capacity management and demand forecasting are critical; avoid idle capacity.
  • Inseparability: focus on the service encounter and maintaining consistent quality across moments of truth.
  • Variability: standardization, employee training, and process improvements reduce variation.
  • No ownership: emphasize experiential benefits and relationship marketing.
  • Simultaneity: manage moments of truth through on-site interactions and environment.
  • Quality measurement: use service levels, customer feedback, and satisfaction metrics.
  • Demand: manage peak times with pricing, promotions, and capacity planning.

Classification of Services

  • By End User:
    • End users: Individuals (hairdressing, personal finance, holidays).
    • Business-to-Business: Firms procuring services from other firms (MTDC & TCS example).
    • Industrial End Users: Plants/factories needing specialized services.
  • By Degree of Tangibility:
    • Highly tangible (e.g., car rentals).
    • Highly intangible (e.g., consulting, counselling).
  • By People Involvement (Contact):
    • High contact (e.g., teaching, surgery).
    • Low contact (e.g., automated banking, web services).
  • By Expertise:
    • Highly professional services (e.g., doctors, lawyers, consultants).
    • Nonprofessional services (e.g., cobbler, masons).
  • By Profit Orientation:
    • Commercial oriented (profit-making).
    • Non-profit organizations (education, libraries).
  • By Location of Delivery:
    • On-site, provider location, or at customer site; some mix.
  • By Lovelock’s Perspectives (Nature, Relationships, Customization, Demand):
    • Nature of service, customer relationships, customization, demand/supply constraints, delivery method.

Service Marketing Triangle (Grönroos)

  • Three components: Company (top management), Employees, Customers.
  • Marketing programs:
    • Internal Marketing: Enabling the promise (employees as internal customers).
    • External Marketing: Setting the promise (customer education and communication before service delivery).
    • Interactive Marketing: Delivering the promise (moment of truth during service encounter).
  • Purpose: Align all three sides to deliver a consistent service experience.

Purchase Process for Services

  • Five stages:
    • Problem recognition
    • Information search
    • Evaluation of alternatives
    • Purchase decision
    • Post-purchase behavior
  • In services, post-purchase evaluation is often more complex due to inseparability and variability.
  • Mood/emotions and the service encounter greatly influence satisfaction.

Marketing Challenges of Services

  • Intangibility leads to perception risk; hard to evaluate pre-purchase.
  • Simultaneity creates on-the-spot quality issues; co-production with customers.
  • Trust and relationship marketing are critical; branding extends to internal culture.
  • Proactive lead generation is challenging; services rely on ongoing relationships.
  • Service deliverers often split selling and service roles; need integrated marketing.
  • Managing service quality and maintaining momentum in service-based revenue cycles can be volatile.

Service Economy and Growth of Services

  • Service sector is the dominant contributor to GDP in many economies; growth of services is a global trend.
  • India-specific growth factors include liberalization, IT growth, urbanization, demographic shifts, and globalization.
  • Servitization: Goods increasingly come with services; the goods-service continuum shows moving toward more service content in offerings.
  • Service taxes, foreign investment, and export of services are key drivers in economies like India.

Factors Stimulating Growth in Services (General)

  • Demographic changes: aging population increases travel, healthcare, and leisure services.
  • Social changes: more women in workforce, higher disposable income, more service consumption.
  • Economic changes: globalization, IT, and specialization raise demand for professional services.
  • Political/legal changes: deregulation and privatization expand service sectors; global trade in services grows.

Factors Leading to Growth of Services in India

  • Economic affluence and rising middle class.
  • Changing role of women and urbanization.
  • IT revolution and export-oriented services (software, BPO).
  • Liberalization and privatization opening up markets.
  • Growth of markets, competition, and service infrastructure.
  • Health care, education, and hospitality as growing sectors.

Goods v/s Services; The Goods-Service Continuum

  • Key differences (summary):
    • Goods: tangible, homogeneous, ownership transfer, production separated from consumption.
    • Services: intangible, heterogeneous, inseparable, produced and consumed together, no ownership transfer.
  • The Goods-Service Continuum shows most offerings include both goods and services to varying degrees; pure goods or pure services are rare.

Service Environment (Service Marketing Environment)

  • Service environment comprises internal and external environments:
    • Internal/Micro Environment: internal customers (employees, sales agents), external customers, competitors, suppliers, regulators.
    • External/Macro Environment: economic, political, regulatory, technological, socio-cultural, demographic, international factors.
  • Needs for marketing: post-90s liberalization and globalization require professional marketing management in services.
  • Factors driving transformation include IT, convergence, globalization, and new regulatory regimes.

Service Marketing Environment: Drivers of Change

  • Government policies: deregulation, privatization, new trade rules.
  • Social changes: rising expectations, affluence, IT adoption.
  • Economic and technological developments: IT, convergence, Internet, mobile tech.
  • Internationalization/globalization: cross-border service delivery and multinational service brands.

Consumer Behaviour and Positioning a Service

  • Consumer behaviour: orderly process of how individuals decide on purchases of goods/services.
  • Factors influencing buyer behavior: social, personal, psychological, and cultural factors.
  • Types of buying behaviour:
    • Complex buying behaviour
    • Dissonance-reducing buying behaviour
    • Habitual buying behaviour
    • Variety-seeking buying behaviour
  • Information attributes in services: search vs experience vs credence attributes.
  • Stages of buying decision: problem recognition, information search, evaluation, purchase, post-purchase behavior.
  • Customer expectations: desired vs adequate; Zone of Tolerance defines acceptable variability.
  • Managing expectations: accurate promises, reliable execution, effective communication.
  • Service encounters (Moment of Truth): core interaction points between customer and service provider; can be remote, phone, or face-to-face.
  • Customer involvement: levels vary by service type; higher involvement in high-contact services.
  • Positioning a service: designing a distinct and valued market position; use positioning maps to identify gaps and differentiate using attributes, quality, price, service benefits, or leadership.
  • Service quality dimensions (for positioning): tangibles, reliability, responsiveness, assurance, empathy.

Service Encounters and Customer Involvement

  • Service encounters: moments where customers interact with the service system; crucial for perceived service quality.
  • Elements of service encounter: customer, service provider, delivery system, physical evidence.
  • Levels of customer contact:
    • High-level contact: in-person, ongoing involvement (e.g., medical, haircare).
    • Medium-level contact: partial involvement.
    • Low-level contact: electronic/remote delivery (e.g., online banking).
  • Variation in customer involvement: core activity may require different involvement levels across services.

Service Recovery

  • Service recovery: systematic efforts to correct a problem after a service failure and retain goodwill.
  • Five essential elements: apology, urgent reinstatement, empathy, symbolic atonement, follow-up.
  • Effective recovery strategies: empower front-line staff, act quickly, communicate clearly, consider compensation when appropriate, follow up for closure.
  • Impact: well-handled recovery can convert dissatisfaction into loyalty; poor recovery damages reputation.

Customer Contacts Case Contexts (Illustrative)

  • Moments of truth and critical incidents illustrate how service encounters shape loyalty.
  • Recovery examples emphasize timely response, appropriate remedies, and ongoing relationship management.

Quick Reference: Key Formulas and Visuals (summary)

  • Zone of Tolerance concept: ZoneextofTolerance=[DesiredextService,AdequateextService]Zone ext{ of }Tolerance = [Desired ext{ Service}, Adequate ext{ Service}]
  • Service Marketing Triangle relationships: Company ↔ Employees (Internal Marketing); Company ↔ Customers (External Marketing); Employees ↔ Customers (Interactive Marketing).
  • Goods-Service Continuum: pure goods -- mixed offerings -- pure services (most offerings lie along this continuum).
  • Service quality dimensions (for positioning): extTangibles,extReliability,extResponsiveness,extAssurance,extEmpathy.ext{Tangibles}, ext{Reliability}, ext{Responsiveness}, ext{Assurance}, ext{Empathy}.