SERVICES MARKETING (MAMM5057)

CHAPTER 1: An overview of Services Marketing

CHAPTER 2: The Service development
CHAPTER 3: Basic Service Marketing Strategies
Chapter 4: Extended pillars of Service Marketing
CHAPTER 5: Consumer Behavior in Services
CHAPTER 6: Service & Service Quality Management
Chapter 7: Demand and Capacity Management
CHAPTER 8: Customer Relationship Management
CHAPTER 9: E- Services
Chapter 10: Monitoring and Evaluating the Service

Lecture by: Aschalew A (Asst. Prof)

 CHAPTER 1: An overview of Services Marketing

Introduction to Services

Why Services Marketing?

Differentiating goods from services

Characteristics of services
Service sectors and career opportunities

Growth of service sector & its antecedents of growth

 Introduction to Service
 A service is an act or performance offered by one party to another.

 Although the process may be tied to a physical product, the

performance is essentially intangible and does not normally result
in ownership of any of the factors of production.

 Services are economic activities that create value and provide

benefits for customers at specific times and places as a result of
bringing about a desired change in the recipient of the service
(Christopher Lovelock)

 Services are deeds, processes, and performances.

 Services are not tangible things that can be touched, seen, and felt,
but rather are intangible deeds and performances (Zeithaml and
Bitner)
Cont’d
 A service is an activity or series of activities of more
or less intangible nature that normally, but not
necessarily, take place in interactions between
customer and service employees and/or physical
resources or goods and/or systems of the service
provider, which are provided as solutions to customer
problems. (Christian Gronroos)

 Services include all economic activities whose output

is not a physical product, is generally consumed at the
time it is produced, and provides added value in forms
that are essentially intangible concerns of its first
purchaser.( Quinn, Baruch, and Paquette)
Ctd…
 A precise definition of goods and services should distinguish
them on the basis of their attributes.
 A good is a tangible physical product that can be created
and transferred; it has an existence over time and thus can
be created and used later.
 A service is intangible and perishable. It is an occurrence
or process that is created and used simultaneously. While
the consumer cannot retain the actual service after is
produced, the effect of the service can be retained. (Sasser,
Olsen, and Wyckoff)
 A service is a time-perishable, intangible experience
performed for a customer acting in the role of co-producer.
(James Fitzsimmons)
 Conceptualizing the service ‘offering’

 Core services vs augmented or supplemental services

 Charles Revson of Revlon : ‘In the factory we make cosmetics; in the drug
store we sell hope.’
 The augmented product , supplementary, peripheral and facilitating: offer
additional benefits.
 The ‘augmented product’ for services is usually in the form of further
services and these are also referred to as.
 Form of additional benefits: credit and financing, fast and reliable delivery,
free-phone, supportiveness, and repair and maintenance.
 Examples of core benefits of services:
 Rail travel – safe and reliable transportation

 Tax consultant – peace of mind

 Education course – career enhancement, self-actualization

 Hotel – hospitality, rest and recuperation

 Hairdresser – feel more attractive, confidence-booster.

Core and secondary/supplemental aspects of an
airline service

 . Cleanliness of plane
and airport lounges

Regular & fast Airport

check-in guidance and
facilities Transport directions

Addis Ababa
Refreshment on - London Helpfulness of
request and check-in &
catering services airline staff

Entertainment/in-
flight movies/ games
for children
Concepts of tangible and intangible dimensions

 The tangible/intangible dimensions as a basis for

conceptualizing different types of services, simple to
complex.
 Customer expectations have two dimensions: instrumental and
psychological aspects. (Gronroos)
 The ‘instrumental’ dimension: the ‘what’ of service delivery.
 The psychological dimension: the ‘functional’ aspects or
‘how’ of service delivery
 Create good ‘functional’ quality as well as ‘technical’ quality
and so contribute to the overall image of the service package
and service company.
Tangible and intangible dimensions of service
delivery
Tangible elements: relatively easy to Intangible elements: relatively
 .
measure difficult to measure

Physical facilities Image

Credit facilities Congenial atmosphere
Speed of delivery Security/confidentiality
Technical expertise/support Advice/guidance
Appearance of staff Competence of staff
Responsiveness
Accessibility/courtesy
Individual customer service
Scope of services
Service activities Service as a concept

Customer service A service organization

Service based activities As a core product

Value added activities As an augmented product

As product support

As an act
Service as an organization

 Service as an organization, that is the entire business or not-for-profit structure

that resides within the service sector.
 For example, a restaurant, an insurance company, a charity.
Service as core product
 The commercial outputs of a service organization such as a bank account, an
insurance policy or a holiday.
Service as product augmentation
 any peripheral activity designed to enhance the delivery of a core product.
 For example, provision of a courtesy car, complimentary coffee at the
hairdressers.
Service as product support
 any product- or customer-oriented activity that takes place after the point of
delivery.
 For example monitoring activities, a repair service, up-dating facilities.
 Industries Classified within the Service Sector
 Transportation
 Public utilities
 Communication
 Wholesale and retail trade
 Finance and banks
 Insurance
 Real estate
 Hotels
 Theatre halls
 Auto repair
 Health services
 Legal services
 Federal and state government
Services versus Customer Service

 Services are provided for sale by a company.

 Customer service is the service provided in support of a
company’s core products. It includes:
 Answering questions
 Taking orders
 Dealing with billing issues
 Handling complaints
 Scheduling maintenance or repairs
 There is no charge for customer service
 Quality customer service is essential to building customer
relationships
Dependency of Manufacturing on Services

 . Value-Added Services
•Financing
Infrastructures Services
•Communication
·Leasing ·Transportation
·Insurance ·Utilities
·Banking

Personal Services
•Health care
Manufacturing Service Distribution Services ·Restaurants
inside Company: •Wholesaling ·Hotels
•Finance ·Retailing
·Accounting ·Repairing
·Legal, and R&D
Consumer
(Self-service)

Business Services
Supporting Manufacturing: Government Services
•Consulting •Military
·Auditing ·Education
·Advertising ·Judicial
·Waste disposal ·Police and fire protection
Tangibility Spectrum

 Intangibility is a key determinant of whether an offering

is or is not a service.

 Very few products are purely intangible or totally

tangible i.e, there are very few “pure services” or “pure
goods”

 Services tend to be more intangible than manufactured

products, and manufactured products tend to be more
tangible than services.
Why Services Marketing?
1. A service based economy
 Economic importance of services:
 The service sector represents major share of GDP
 The service sector has become a major employer
 Trade in services is growing world wide
2. Services as a business imperative in Manufacturing and IT
 Manufacturing and technology industries revenues and profit are coming from services
 Customers not only expect excellent, high-quality goods; they also expect high levels of
services all with them.
 As manufacturers and IT companies become more and more service-focused, the need for
special concepts and approaches for managing and marketing services becomes even more
apparent.
3. Services marketing is different
 More variable exist in the marketing mix of services than for consumers goods.
 Marketing and operations are more closely linked.
 Customer/employee interface is high
 Pricing of services is difficult.
 Promotional price cuts tended to erode positioning and image.
Differences in goods vs services marketing

Goods Services Resulting Implications

Tangible Intangible Services cannot be inventoried
Services cannot be patented
Services cannot be readily displayed or
communicated.
Pricing is difficult

Standardized Heterogeneous Service delivery and customer satisfaction depend on

(variable) employee actions.
Service quality depends on many uncontrollable
factors.
There is no sure knowledge that the service delivered
matches what was planned and promoted.

Production separate Simultaneous Customers participate in and affect the transaction.

from consumption production and Customers affect each other.
consumption Employees affect the service outcome.
(inseparable) Decentralization may be essential.
Mass production is difficult

Nonperishable Perishable It is difficult to synchronize supply and demand with

services.
Services cannot be returned or resold
Classification of Service
Level 1: Nature of Organization
Category Option UoG
Purpose (satisfy needs of) Individuals Purpose is to satisfy the needs of
Business both individuals, government
Both agencies, NGOs and business
firms.
Structure Profit structure is a government
Nonprofit organization
Type Public Type is a public institution
Private
Level 2: Nature of service
Degree of tradability Embodied service Degree of tradability is a pure
Pure service service
Service directed toward Individuals Service is directed toward
Things individuals
Degree of merchantability High Degree of merchantability is low
Medium
Low
Ctd…
Level 3: Nature of Demand
Level of demand Demand exceeds capacity Demand exceeds capacity
Demand equals capacity
Capacity exceeds demand
Degree of fluctuation Wide Degree of fluctuation is variable
Narrow
Variable
No fluctuation

Level 4: Service Package

Number of services and One service Multiple service
goods One service, one good
One service, multiple goods
Multiple services
Multiple services, one good
Multiple services, multiple
goods
Degree of equipment base High Degree of equipment base is
Medium medium
Low
 Ctd…
Level 5: Delivery Method
Availability of service One site Availability of service is at
Multiple sites multiple sites

Nature of delivery Continuous Nature of delivery is discrete

Discrete
Both

Type of consumption Independent Type of consumption is collective

Collective
Both

Allocation of capacity Reservation Allocation of capacity is

Order-of-arrival preferential
Preferential
 The Service Process Matrix
Roger Schmenner

Degree of interaction and customization

Low High

Low Service factory: Service shop:

 Airlines  Hospitals
Degree of Labor  Trucking  Auto repair
Intensity  Hotels  Other repair services
 Resorts & recreation
Mass service: Professional services:
 Retailing  Physicians
 Wholesaling  Lawyers
High
 Schools  Accountants
 Retail aspects of  Architects
commercial banking
 Ctd…
 Is a two dimensional model developed by Roger Schmenner
 The vertical dimension measures the degree of labour intensity - the ratio of
labor cost to capital cost.
 The horizontal dimension measures the degree of customer interaction and
customization, which describes the ability of the customer to affect personally
the nature of the service being delivered.
 Service Factories - provide a standardized service with high capital
investment, much like a line-flow in a high-capital environment.
 Service Shops - provide a customized service with high capital investment.
 Mass services - provide an undifferentiated service or standardized service in
a labor intensive environment.
 Professional Services – Customers seeking a professional service will be
given individual attention by highly trained specialists.
THE SERVICES MARKETING TRIANGLE

 The services marketing triangle shows the three interlinked groups that
work together to develop, promote and deliver services.
 The key players are:
 The company

 The customers, and

 The providers

 There are three types of marketing that must be successfully carried out
for a service to succeed:
 External marketing: Making promises

 Internal marketing: Enabling promises

 Interactive marketing: Keeping promises

The Service Marketing Triangle
Company

Internal Marketing External

Marketing

Providers Interactive Marketing Customers

EXTERNAL MARKETING: MAKING PROMISES

 A company makes promises to its customers regarding what they can expect and how it will
be delivered.
 Traditional marketing activities such as advertising, sales, special promotions, and pricing
facilitate this type of marketing.
 For services the design and decor of the facility, and the service process itself also
communicate the promise to customers.

INTERACTIVE MARKETING: KEEPING PROMISES

 External marketing is just the beginning for services marketers: Promises made must be
kept.
 Keeping promises or interactive marketing is critical from the customer's point of view.
 Service promises are kept or broken by the employees of the firm or by third-party providers
in real time.
 Promises are kept or broken and the reliability of service is tested every time the customer
interacts with the organization.
INTERNAL MARKETING: ENABLING
PROMISES


To deliver on the promises made, service providers must have
the skills, abilities, tools, and motivation. i.e. they must be
enabled.
 Enabling involves:
 Recruiting,

 Training

 Providing with tools and appropriate internal systems

 Rewarding for good service

 Internal marketing hinges on the assumption that employee

satisfaction and customer satisfaction are inextricably linked.
The Gaps Model of Service
Quality
 The customer gap
 The provider gaps
 Gap 1.Not knowing what customers expect
 Gap 2.Not selecting the right service designs and
standards
 Gap 3.Not delivering to service standards
 Gap 4.Not matching performance to promises
The Gaps Model of Service
Quality
Expected service

Customer gap

Perceived service

External
Service delivery Gap 4
communication to
Gap1 Gap3 customers
Service design &
standards
Gap 2
Company perception of
consumer expectation
Services Quality Dimensions
 Technical dimensions are the ‘what’ or the instrumental dimensions of service delivery.
 Functional dimensions are the ‘how’ dimensions of service delivery.
 Tangible dimensions relate to the more concrete evidence of a service actually taking place.
 Intangible dimensions are usually the core aspects of the service, the actual process, deed, act,
performance central to the service delivery.
 Physical facilities and ‘service-scapes’ refer to the immediate environment where a service
activity takes place.
 Reliability entails the consistency of service performance and dependability.
 Responsiveness concerns the willingness and readiness of staff to deliver the service and respond
to customers’ requirements.
 Competence refers to the ability of the service company to actually deliver the service.
 Credibility concerns the trustworthiness, believability and honesty experienced during the service
encounter.
 Empathy and understanding the customer is one of the most intangible dimensions in practice.
 Image is the mental representation of reality sustained by an individual or group.