1.

The nature of services marketing

So far, much of what has been said could be equally applicable to either a product or a service. So, is there anything special about services marketing? At one level, the theory of marketing has universal application the same underlying concerns and principles apply whatever the nature of the business. However, the nature of a particular service business may dictate a need to place much greater emphasis on certain marketing elements, which in turn could lead to different marketing approaches. It is frequently argued that services have unique characteristics that differentiate them from goods or manufactured products.

Definition and characteristics of Services The American Marketing Association defines services as - Activities, benefits and satisfactions which are offered for sale or are provided in connection with the sale of goods. The defining characteristics of a service are: Intangibility: Services are intangible and do not have a physical existence. Hence services cannot be touched, held, tasted or smelt. This is most defining feature of a service and that which primarily differentiates it from a product. Also, it poses a unique challenge to those engaged in marketing a service as they need to attach tangible attributes to an otherwise intangible offering. 1. Inconsistency: Given the very nature of services, each service offering is unique and cannot be exactly repeated even by the same service provider. While products can be mass produced and be homogenous the same is not true of services. Eg: All burgers of a particular flavor at McDonalds are almost identical. However, the same is not true of the service rendered by the same counter staff consecutively to two customers. 2. Inventory: Services cannot be stored, saved, returned or resold once they have been used. Once rendered to a customer the service is completely consumed and cannot be delivered to another customer. Eg: A customer

dissatisfied with the services of a barber cannot return the service of the haircut that was rendered to him. At the most he may decide not to visit that particular barber in the future. 3. Inseparability: This refers to the fact that services are generated and consumed within the same time frame. Eg: a haircut is delivered to and consumed by a customer simultaneously unlike, say, a takeaway burger which the customer may consume even after a few hours of purchase. Moreover, it is very difficult to separate a service from the service provider. Eg: the barber is necessarily a part of the service of a haircut that he is delivering to his customer. 2. Importance of Marketing of Services Given the intangibility of services, marketing them becomes a particularly challenging and yet extremely important task.

A key differentiator: Due to the increasing homogeneity in product offerings, the attendant services provided are emerging as a key differentiator in the mind of the consumers. Eg: In case of two fast food chains serving a similar product (Pizza Hut and Dominos), more than the product it is the service quality that distinguishes the two brands from each other. Hence, marketers can leverage on the service offering to differentiate themselves from the competition and attract consumers. Importance of relationships: Relationships are a key factor when it comes to the marketing of services. Since the product is intangible, a large part of the customers buying decision will depend on the degree to which he trusts the seller. Hence, the need to listen to the needs of the customer and fulfill them through the appropriate service offering and build a long lasting relationship which would lead to repeat sales and positive word of mouth.

3. The service marketing mix is also known as an extended marketing mix and is an integral part of a service blueprint design. The service marketing mix consists of 7 Ps as compared to the 4 Ps of a product marketing mix. Simply said, the service marketing mix assumes the service as a product itself. However it adds 3 more Ps which are required for optimum service delivery.

The product marketing mix consists of the 4 Ps which are Product, Pricing, Promotions and Placement. These are discussed in my article on product marketing mix the 4 Ps. The extended service marketing mix places 3 further Ps which include People, Process and Physical evidence. All of these factors are necessary for optimum service delivery. Let us discuss the same in further detail. 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 beowned. 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. 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. 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 are necessary to

survive. Thus banks, IT companies, and dotcoms place themselves above the rest by advertising or promotions. 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 ambience 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. 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. 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 companys successful 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. 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. Thats 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. This is the service marketing mix (7p) which is also known as the extended marketing mix.

6. Part guesswork, part experience, part number crunching how ever you look at it, determining your price is a difficult task. Here are nine factors to take into consideration when pricing your services: 1. Your Costs If your rate doesnt include enough just to break-even, youre heading for trouble. The best thing to do is sum up all your costs and divide by the number of hours you think you can bill a year. Whatever you do, DONT think you can bill every hour. You must account for sick days, holidays, hours working on the business, hours with no work and so on. Also make sure you factor in all the hidden costs of your business like insurance, invoices that never get paid for one reason or another, and everyones favourite taxes. 2. Your Profit Somewhat related to your costs, you should always consider how much money you are trying to make above breaking even. This is business after all.

3. Market Demand If what you do is in high demand, then you should be aiming to make your services more expensive. Conversely if theres hardly any work around, youll need to cheapen up if you hope to compete. Signs that demand is high include too much work coming in, other freelancers being overloaded and people telling you theyve been struggling to find someone to do the job. Signs that demand is low include finding yourself competing to win jobs, a shortage of work and fellow freelancers reentering the workforce. 4. Industry Standards Its hard to know what others are charging, but try asking around. Find out what larger businesses charge as well as other freelancers. The more you know about what others are charging and what services they provide for the money, the better youll know how you fit in to the market. 5. Skill level Not every freelancer delivers the same goods and one would expect to pay accordingly. When I was a freelancing newbie I charged a rate of $25 an hour for my design, when I stopped freelancing recently my rate was $125 an hour. Same person, but at different times I had a different skill level and hence was producing a different result. Whatever your rate, expect it to be commensurate with your skill. 6. Experience Although often bundled with skill, experience is a different factor altogether. You may have two very talented photographers, but one with more experience might have better client skills, be able to foresee problems (and thus save the client time and money), intuitively know whats going to work for a certain audience and so on. Experience should affect how much you charge. 7. Your Business Strategy Your strategy or your angle will make a huge difference to how you price yourself. Think about the difference between Revlon and Chanel, the two could make the same perfume but you would never expect to pay the same for both. Figure out how you are pitching yourself and use that to help determine if you are cheapn'cheerful, high end or somewhere in between.

8. Your Service What you provide for your clients will also make a big difference to your price tag. For example you might be a freelancer who will do whatever it takes to get a job just right, or perhaps you are on call 24-7, or perhaps you provide the minimum amount of communication to cut costs. Whatever the case, adjusting your pricing to the type and level of service you provide is a must. 9. Who is Your Client Your price will often vary for different clients. This happens for a few reasons. Some clients require more effort, some are riskier, some are repeat clients, some have jobs you are dying to do, some you wouldnt want to go near with a stick. You should vary your price to account for these sorts of factors. The gap model (also known as the "5 gaps model") of service quality is an important customer-satisfaction framework. In "A conceptual model of service quality and its implications for future research" (The Journal of Marketing, 1985), A. Parasuraman, VA Zeitham and LL Berry identify five major gaps that face organizations seeking to meet customer's expectations of the customer experience.

The five gaps that organizations should measure, manage and minimize:

Gap 1 is the distance between what customers expect and what managers think they expect - Clearlysurvey research is a key way to narrow this gap. Gap 2 is between management perception and the actual specification of the customer experience - Managers need to make sure the organization is defining the level of service they believe is needed. Gap 3 is from the experience specification to the delivery of the experience Managers need to audit the customer experience that their organization currently delivers in order to make sure it lives up to the spec. Gap 4 is the gap between the delivery of the customer experience and what is communicated to customers - All too often organizations exaggerate what will be provided to customers, or discuss the best case rather than the likely case, raising customer expectations and harming customer perceptions. Finally, Gap 5 is the gap between a customer's perception of the experience and the customer's expectation of the service - Customers' expectations have been shaped by word of mouth, their personal needs and their own past experiences. Routine transactional surveys after delivering the customer experience are important for an organization to measure customer perceptions of service.

Each gap in the customer experience can be closed through diligent attention from management. Survey software can be key to assisting management with this crucial task.