Chapter 1: Introduction To Service Marketing

Chapter 2: Service Marketing Environment & Segmentation Of

Services
Chapter 3: Consumer Behavior In Services Marketing
Chapter 4: Service Marketing Mix
Chapter 5: Service Guarantees And Service Encounters
 Chapter-1: Introduction to Services Marketing
Definition of Services
1. AMA: “Services are activities, benefits or satisfaction which are offered for sale
or provided in connection with the sale of goods”.

2. Philip Kotler: “Service is any activities or benefits that one party can offer to
another that is essentially intangible and does not result in ownership of
anything its production may or may not be tied to a physical product”.

3. Christopher Lovelock: “A Service is an act of performance offered by one

party to another. Although the process may be tied to physical product, the
performance is essentially intangible and does not normally result in ownership
of any factors of production”.

Factors Responsible for Growth of Service Sector

The factors can be classified as

Demographic Social Economic Political & Legal

 Size of  Working Women  Rising Income  Changing business
Population
 Smaller Families  Globalisation Environment
 Rise in Life
Expectancy  Higher Mobility  Increased  New Rule under WTI
 Rise in Literacy  Changing Tastes specialization  Merger and
 Immigration  Growth of IT Acquisition
 Privatisation

Increased Demand for Services

Intense Competition

Service innovation

Increased focus on Service Marketing

1) Size of population : The rapid rise in population in India from 360 million to
1120 million has resulted in increased demand for all services.
2) Rise in Life Expectancy : It has Increased from 40 years to 64 years. It has
created higher demand for health care & medical services.
3) Rise in Literacy : The Literacy rate has increased from 36% to 65% this has
created higher demand for educational services including higher education.
4) Working Women: There is rapid increase in the women’s participation in
economic activities as a result there is higher demand for babysitting, domestic
help, and recreation facilities.
5) Smaller Families: As a result of smaller families there is increased demand for
all types of services.
6) Higher Mobility: As a result of increase in income education there is higher
mobility of people both within the country as well as outside the country. This
has created higher demand for transport, communication and other services.
7) Changing Tastes: As a result of higher income and economic affluence there
has been change in consumer taste and quality of life. For Example – Travel,
Entertainment, Club etc.
8) Immigration: As a result of Urbanization there is rapid rise in the number of
immigration in urban areas resulting in higher demand for civic facilities,
infrastructure and other services.
9) Rising income: As a result of rising PCI / GDP and disposable income there
is rapid increase in demand for services PCI is Rs. 55000/-
10) Globalization: The globalization process has resulted in integration of
economies, market financial institutions. There is rapid rise in FDI and portfolio
investment. Foreign retailers are entering Indian market.
11) Increased Specialization: As a result of increased specialization and
complexity of products there is higher demand for professional & Technical
persons like tax consultants, legal consultants.
12) Growth of IT: India is one of the leading player in IT Services IT exports are an
important part of India’s export. India has the largest number of software skilled
manpower in the world. There is faster transfer of information and services,
there is rapid rise in the number of BPO and KPO in the country.
 13) Privatization: The government is encouraging privatization and disinvestment.
Government has allowed 100% FDI in health care, housing, construction road.
Govt. encourages public private partnership in health care, higher education.
14) Changing Business Environment: The global business environment has
changed. WTO is encouraging free trade and renewal of all restrictions. The
economic system in countries is also changing.
15) New Rules under WTO: WTO has passed various agreements like TRIPs,
TRIMs, and GATS. This has benefited service sector to expand and improve
the quality of services, WTO has also removed quota which has benefited India
to increase its exports.

16) Merger & Acquisition: There is a trend towards internationalization. Many

Indian firms are merging with foreign firms and vice-versa. This has created
demand for legal and financial professional.

Role of Services (World/ India)

Role of Services in World: The role of service can be seen from the point of:
[1] Contribution to Employment: SS contributes substantially to employment. In USA
in 1950 employment in SS was 50% which increased to 83% further during recession
this sector is not much affected as compared to manufacturing. SS has created various
job opportunities in retail, IT, education, finance, operations, health care, insurance,
travel and tourism, etc.

[2] Contribution to GDP: SS also contributes significantly to GDP. This can be seen as
below
Rank Country Percentage
1 USA 80
2 Japan 78
3 France 78
4 UK 73
5 Germany 72
It can be seen that SS contributes more than 70% to GDP. In USA it is 80% besided
there are many countries in the world of which get more than 60% GDP from SS.

[3] Contribution to Exports: International trade in services increased by three times

during the last two decades. It has increased from 400 billion USD to 600 billion USD.
Export of services is dominated by developed countries accounting for 70 % share
and developing countries 30% share.

[4] Contribution to Higher Standard of Living: SS also contribute to higher standard of

living in many countries. This is due to higher employment, higher income and exports.
For example- USA has highest per capita income and in USA service sector
contributes 80% to GDP.

[5] Contribution to better environment: SS also contribute to eco friendly environment

as compared to manufacturing sector. It is for this reason that many textile and
chemical industries are being shifted from developed countries.

ROLE OF SERVICES IN INDIA

The role of SS in Indian economy can be seen as below
[1] Contribution to Employment: There is rapid in employment in SS especially after
199. For example in the retail sector alone the industry will create five years. Similarly
there is expansion of financial sector, It, hospital, health care.

[2] Contribution to GDP: In India at one time prime sector contributes maximum to
GDP but today service sector contributes maximum (59%)this can be seen as below:

Year Primary Secondary Service

1951 53 17 30
1991 30 28 42
2001 22 27 51
2012 14 27 59
It can be seen that the contribution of primary sector declined from 53% in 1951 to
14% in 2012 and the contribution of service sector has increased from 30% to 59%.

[3] Contribution to Exports: India is one of the leading service sector exporter. India
achived 10th rank in service sector exports globally its rank in merchandise export is
20th in the world. India’s service sector share in the world exports increased from 2.6%
in 2009 to 3% in 2010. Though India has surplus on capital account. It has helped
India to overcome its BOP problem.

[4] Higher Standard of Living: Because of higher GDI growth, higher employment,
exports, income the service sector has contribute to higher standard of living.

[5] Contribution to better environment: SS has also contributed to better environment.

This sector is more eco-friendly as compared to manufacturing sector.

CHARACTERISTICS OF SERVICES

The imp characteristics of services Are:-

[1] Intangible: Services are experiences that cannot be displayed like physical
production services are invisible entities that cannot be touched or inspected. The
intangibility creation a feeling of uncertainty about the outcome of a service .This
creates marketing challenges as according to Carman &Uhl a consumer feels that he
has a right to see, touch, hear, smell or taste the goods before he buys & this is not
possible in services.

[2] Perishable: Services are perishable in the sense that services cannot be stored foe
later sale or use. If a particular work is not done in time that time is lost forever. Unused
or underused services are economic waste. For example vacant room in a five star
hotel, few audiences for a particular show such revenue is lost.

[3] Inseparable: services are inseparable means that services cannot be separated
from their providers whether the providers are people or machine. For eg, doctor has
to be physically present for an operation. If a service employee provides the service.
Then the employee becomes part of the service. According to Donald Cowell, “Goods
are produced, sold & then consumed whereas the services are sold & then produced
& then consumed”.

[4]Heterogeneity / Variability: It means service quality cannot be standardized the

quality of service differs widely. It depends on who provide them as well as when,
where and how.
For example: Service in Five star hotels is much better than ordinary hotel. The same
of type of service cannot be sold to all consumers even if they pay the same price.

[5] Ownership: The ownership of service is not transferable. The user has only access
to the service.

[6]Simultaneously: Services cannot be delivered to the customer or user’s services do

not move through channels of distribution. Users are brought to services or providers
go to the users, services have limited geographical area.

[7] Quality Measurement: The quality of service cannot be exactly measures.

For example: we can measure the quality of food in a hotel but difficult to measure the
services i.e. hotel environment, service delivery, behavior of staff, ambience etc. we
can only determine the level of satisfaction.

[8] Nature of Demand: Services are of fluctuating nature. For example: In hotel there
is heavy rush during weekend and less customer during working days. Thus the
important challenge for service marketers to match demand to capacity.

CLASSIFICATION OF SERVICES

Classification of services is necessary for effective marketing and for marketing

mix. Each service may differ in its features, the factors which help in classification of
services are:
1. Marketable and Unmarketable services.
2. Producer services and consumer services.
3. Product service continuum
4. Extent of consumer participation
 5. Continuous supply and casual supply
6. Machine oriented and person oriented services can be classified as:

a) On the basis of end user: Services on the basis of end user can be
classified as:
Services provided to individual
Individual Hair cutting
1 consumer
Consumer Personal loan
It has mass market
MTDC takes
Business To One Business unit provides services
2 services of
Business to another unit
TCS
ONGC
3 Industrial User End User is plants and factories requires drilling
services

b) On the basis of degree of Tangibility: Services can also be classified on the

basis of degree of tangibility involved such as:
People Oriented Things Oriented
Health care Freight
1 Tangible Beauty saloon Dry cleaning
Restaurant Banking
Education
Legal services
2 Intangible Information service
insurance
Entertainment

[3] On the basis of customer contact involved: Services can also be classified on the
basis of customer contact involved. Service provider may have high or low contact in
providing services. For example - teaching involves high contact and it is people based
while insurance involve low contact and it is things based.

[4] On the basis of degree of exercise of expertise: Services can also be classified on
the basis of degree of expertise needed for service transaction such as :
a) Highly professional services example Doctors, Lawyers, teachers.
b) Nonprofessional services Ex Cobbler, mason

[5] On the basis of Objectives: It can be classified as

a) For Profit: Private Schools, Airline
b) Not for Profit: NGO, School for blind, cancer hospitals, society

[6] On the basis of location: Services can be classified on the basis of place of service
provided
Service provider go to the customer, E.g. House
1 Where Customer is Located
Repair
Where Service provider is
2 Customer go to service, E.g. hospital
Located
3 Both Ambulance
 Chapter-2: Service Marketing Environment

It refers to surrounding which affect business. It can be classified as

[1] Internal [2] External

[1] Internal Environment: Internal (Micro) environment consist of all the elements in
the company’s immediate environment that affect the performance of the company.
These include employees (Internal marketing) direct sale agents, suppliers,
competitors, customer, public etc. The micro environment is most crucial in service
sector because these elements are directly involved in service marketing. Customers
have direct inter-action and they get an idea about the quality of services provided by
firm. Therefore the management must provide proper training and motivation to the
internal marketing team.
Internal environment also include policies, mission, vision, objectives, brand equity,
physical assets, R & D, Human resources, Marketing capabilities.

External Environment (Macro Environment)

It includes Economic Environment, Demographic Environment, Social & Cultural
Environment, Technological Environment, Political Environment, & Global
Environment. These are outline as below:

1) Economic Environment: This is the most important element of macro

environment because it includes all govt. policies such as monetary policy,
fiscal policy, trade policy, investment policy, licensing policy etc. It also indicates
the various macroeconomic indicators like GDP, PCI, Inflation, Income
distribution which directly affect business. For Example: In India after 1991
there is liberalization govt. policies which resulted in rapid expansion of service
sector. Thus on the business organization decides its business policies.

2) Demographic Environment: It includes size of population, age and sex

composition, education, occupation, language, race, birth rate, death rate,
urbanization etc. Business Organization can use such data for determining
 market segmentation, targeting and positioning of their products and services.
For example: Rising population will create higher demand for services.

3) Political Environment: It consists of role of government, political system,

government stability, role of legislature, executive, judiciary, rights & duties. The
Political Environment creates business confidence and influence investment
decisions. For example: The govt. has not decided about 100% FDI in multi
brand retailers. As a result foreign retailers will not enter the market; this
decision was not taken because of differences among different political parties
in central govt.

4) Social & Cultural Environment: It includes different social groups, objectives,

goals, business ethics, social culture, language, religion, customs, brief etc.
Social Environment is changing in India due to higher literacy, rising income,
greater awareness due to internet etc. For Example: Emergencies of Mall
culture’ Today customer look for convenience, enjoyment while shopping,
service provider must consider this while planning service marketing strategies.

5) Technological Environment: It includes the level of technology, type of

technology, methods of technology, reason and development, information
technology etc. Technology is most important in services as it can contribute to
higher productivity, efficiency and customer satisfaction. For Example: ATM has
created 24 hour banking services spread all over the country.

6) Legal Environment: It consist of rules regulations, laws which regulate

business, business has to operate within such laws. The various laws framed
by the govt. are Trade Mark Act 1969. Essential commodities Act 1955,
Standards of Weights & Measures Act 1969, Consumer Protection Act,
Companies Act 1956, Factories Act 1948, Industrial Dispute Act 1972, Payment
of Gratuity Act 1972, MRTP Act 1969 (Now competition Act 2012), FEMA 2000
etc. Service sector has to comply its working as per legal norms.

7) Global Environment: It consists of policies framed by global organization like

IMF, WTO, World Bank, UNCTAD. For Example: WTO has passed various
 agreements like TRIPs, TRIMs, and GATs and affects business throughout the
world. For Example: agreement on GATS aims at removing all restrictions on
trade in services. Similarly TRIMs aim at removing all barriers on foreign
investment. Global environment also include global changes in economic,
political and other policies in different countries.

GOODS V/S SERVICES MARKETING

GOODS
SERVICES
1) Tangible
1) Intangible
2) Homogenous
2) Heterogeneous
3) Production, distribution
3) Productions, Distribution &
separated from
Consumption are Simultaneous
consumption.
process.
4) A Thing
4) A process
5) Core value produced in
5) Core value produced in buyer
factory
seller meet.
6) Customers do not
6) Customer participate in the
participate in the production
production process.
process.
7) Cannot be stored
7) Can be Stored
8) No Transfer of Ownership.
8) Transfer of Ownership
GOODS MARKETING
1) It refers to marketing of
SERVICE MARKETING
tangible products.
1) It refers to marketing of
2) Marketing task is relatively
intangible services
simple
2) Marketing task is relatively
3) It has limited consumer
difficult.
connectivity
3) It has greater consumer
4) It can be standardized
connectivity.
5) Only marketing dept. deals
4) It cannot be standardized.
with consumer
 6) Marketing mix consists of 5) Many dept. deal with consumer
4ps directly
7) It involves multiple 6) Marketing mix consists of 7Ps
distribution channels (or ps)
8) Quality problem arises 7) It involves limited distribution
before goods are produced. channels.
9) Technical features are 8) Quality problem arises during
important. service delivery
10) Internal marketing is less 9) Technical features & functional
practiced. performance are important.
10) Internal marketing is more
practiced.

PRODUCT SERVICE CONTINUUM

It refers to intermingling of goods and services offering in an unprecedented manner

and in different proportions. Today consumers get a mix of goods and services. The
dividing line between goods and services is becoming thinner and thinner and
marketing of goods is increasingly dependent on services offered.
Product service continuum can be measured by placing goods and services on a scale
from tangible dominant to intangible dominant.
Kotler has proposed five categories of market offer viz.
1) Pure tangible goods
2) Tangible goods with services
3) Equal proportion of goods and services
4) Major Services and minor goods
5) Pure Service
This can be seen from the following: CHART

Salt
High Soft Drinks
Detergent
Automobile
T Cosmetics
A Fast food outlet
Ad agency
N Airline
G Investment
Consulting
I Teaching
B
L
E

Low Intangible High

[1] Pure Tangible Goods: Companies offer tangible products only, Example: soap,
toothpaste, salt with no services consumer buy these products on the basis of direct
utility they get.

[2] Tangible Goods with services: Companies offer tangible goods with some services,
Example: Air Condition, TV, Car, Computers, Water Cooler, Washing machine etc. It
has more of tangible goods and some services like guarantee, installation, training,
after sales services.

[3] Goods & Services in Equal Proportion: Companies offer goods and services in
equal proportion, Example: Fast food outlet, food, menu card is tangible while
ambience, décor, hospitability, efficient services are intangible.

[4] Major Services Minor Goods: Companies offer major services accompanied by
minor goods, Example: Airlines Tangible items include food, drink, ticket, boarding
pass; while intangible services include comfort, speed, travel.
[5] Pure Services: Companies offer pure services with no element of tangible products,
Example: Services provided by doctors, lawyers, teachers etc.

a) It helps the companies to determine whether to remain pure good or pure

service or both.
b) It helps in determining marketing strategies
c) It determines the extent of buyer involvement
d) It helps firm to fulfill customer expectations
e) It is applicable to final consumer as well as organizational consumer.

Segmentation of Services
Market segmentation is the sub- dividing of market into homogeneous sub section of
customers , where any sub section may conceivable be selected as a market target to
be reached with a distinct market mix. The marketer has to identify his targeted
customers (segments ). For example, a motorcycle manufacturing company has to
identify their market segments, like female officers, teenage college students, middle
aged customers. After identifying the segments the marketer ( manufacturer ) has to
understand their tastes and expectations. In the case of female customers, they need
not use much power full vehicles, like that the teenagers demand most powerful and
stylish vehicles and the middle aged customers need vehicles having more mileage.
Benefits of market segmentation
No one can satisfy all people all time, can satisfy some people all the time or all people
for some time. This concept is reflected in market segmentation
 Facilitates proper choice of target market
 Helps distinguish one customer group from another within a given market
 Facilitates effective tapping of the market, adapting the offer to the target
 The “ divide and rule” concept as a strategy of dividing markets for conquering
them
 Helps crystallize the needs of the target buyers and bring out more predictable
responses from them, helps develop marketing programs on a more predictable
base, helps develop marketing offers that are most suited to each group
  Helps specialization required in products/services, distribution, promotion, and
pricing for matching the customer group and developing marketing offers and
appeals that match the needs of such groups.
 Makes marketing effort more efficient and economic, helps to identify less
satisfied segments and concentrate on them to improve level of satisfaction
 Helps to concentrate efforts on the most production and profitable segments
instead of frittering them away over irrelevant or unproductive or unprofitable
segments
 Brings benefits to the customer as well, in various ways
 When segmentation attains high sophistication, customers and companies can
choose each other and stay together.
Steps in the Segmentation Process
Five major steps are involved in dividing markets into meaningful segments, although
these steps and their description may vary from one situation to another.
a) Define and analyze the market—determine market parameters (based on
characteristics that may include or exclude customers from a group) within
organization’s mission and business definition, as well as its strategic intent.
b) Identify and describe potential segments—decide on the most useful
dimensions or variables for selecting members of potential market segments;
then aggregate customers into homogeneous groups, develop a profile of the
characteristics of each group, etc.
c) Select the segment(s) to be served—select segments by evaluating against
predetermined criteria, then rank according to the organization’s ability to serve
the market profitably while providing customer satisfaction.
d) Determine the product positioning strategy—determine the best “fit” between a
product and a market according to features most desired by customers;
consider competitors’ positioning strategies, organizational goals, and the
market situation.
e) Design and implement the marketing program—develop a tactical plan
(marketing mix) and determine objectives for the marketing program; all
elements of the marketing mix must be consistent with the selected positioning
strategy.
Bases of segmentation
1. Geographic
a. Region- east, west , south, north, Asian, European, India etc
b. City or metro size etc
c. Density – Urban, rural etc
d. Climate – Hot. Cold, Rainy etc
2. Demographic
a. Age- childhood, young etc
b. Gender – male, female
c. Marital status – married , unmarried
d. Family size
e. Income
f. Purchasing capacity and
g. Price preference
h. Education
i. Occupation
3. Psychographic
a. Life style – culture oriented, sports oriented, outdoor oriented etc
b. Personality
4. Behavioristic
a. Benefit segmentation – economic, durable, value for money etc
b. Purchase occasion – time, objective, location, person,
c. User status
d. Usage rate
e. Brand loyalty
 Chapter-3: Consumer Behavior in Services marketing

Meaning: Acc to Walter & Paul “Consumer behavior is the process whereby individuals
decide whether, what, when, where, how and from whom to purchase goods and
services.”

Consumer Buying Process:

It passes through 5 stages:

1) Problem Recognition: When the buyer feels the need of satisfying a particular
want. The need may arise due to some internal or external stimuli.
For Example: Bank promotion of car loan at low rate of internal can create
desire and need of buying a car.

2) Information Search: The next step is to collect information from different

sources about the need or problem. The various sources of information are
Personal (friends, family, and neighbor’s) Commercial (advertising, sales
persons, dealers, displays) and Public sources (mass media, consumer rating)
consumer generally depends on personal sources while making purchase
decisions.
3) Evaluation of Alternatives: With the help of available information consumer
evaluate the various alternatives in terms of features, quality, prices etc. Then
rank these alternatives. For example: while choosing a hotel for birthday
celebration a person may consider factors like food, quality, variety, price,
ambience, convenience.

4) Purchase Decision: After Evaluating the various alternatives consumer finally

takes a decision regarding the purchase of services which are most preferred
such decisions are also affected by attitude of others and unexpected
situational factors.

5) Post Purchase Behavior: After consuming the services consumer will evaluate
the quality of services in terms of consumer expectations and services
perceived performance. If the services fall short of expectations consumer is
disappointed and if meets expectation, the consumer is satisfied if exceeds
expectations the consumer is delighted. Thus the post purchase behavior of
consumers is most important to marketers. A good word of mouth travels fast.
However in services as consumer also take part in the process of services
delivery he is also responsible for the service performance.
 Consumer Behavior

Problem Information
Recognition Search

Post Evaluation
Purchase of
Beahvior Alternatives

Purchase
Decision

Factors influencing consumer behavior

The various factors influencing consumer behavior can be classified into

four groups namely:
a. Social factors
b. Personal factors
c. Psychological factors
d. Cultural factors

1. Social factors: Social factors include family influence, reference group,

roles and status. Family consumption behavior mostly influenced by
family life cycle i.e., bachelorhood, newly married, parenthood and post
parenthood. Often family members play a significant role in purchase
decision. Reference group also influence the buying behavior. For
example, a student buying a laptop will consult a friend in the IT field
before buying. Peer groups and peer pressure also play important role
in purchasing decisions
Role and status also influence buying behavior. For example, a white
collar executive will consume different services than a blue collar worker.
 A club holiday company will target only the executives in the higher
salary range.
2. Personal factors: Personal factors include age, lifestyle, occupation,
economic circumstances, personality, etc. Needs and wants of people
are different at different age group. For example, young generation may
spend more money on travel and food while old generation may invest
in insurance an old age security. People consume services on the basis
of their occupation. For example, a CEO of a company prefers business
class while his executive may travel by economy class. Economic
circumstances also influence buying pattern. For example, higher
income group consumer may buy branded services while lower income
group prefer unbranded services. Life style includes work hobbies,
shopping, recreation, fashion, food habits which are responsible for
consumer preferences and choice of services. Personality refers to traits
of a person in terms of self confidence, dominance, sociability,
autonomy, defensiveness, adoptability and aggressiveness. Marketers
use the concept of brand personality to influence consumers.
3. Psychological factors: It includes the various psychological factors like
motivation, perception, learning, beliefs and attitudes. Motive (drive) is a
need that pressing for directs satisfaction. A person tries to satisfy the
most important need first. How a motivated person act depends on
perception. Perception is the process by which people select, organize,
and interpret information to form a meaningful picture of the world.
Learning describes charges in individual behavior when people act they
learn. Through learning people acquire belief and such belief and
attitude (people’s consistent evaluation, feeling towards an object) also
influence consumer behavior.
4. Cultural factors: Cultural factors exert a deep influence on consumer
behavior. This includes culture, sub culture, and social class. Culture is
the most basic cause of a person’s wants and behavior. Human behavior
is largely learned. Culture differs from group to group in a society. For
example, a cultural shift towards more concern about health and fitness
has created huge market for health services. Each culture includes sub
culture. Sub culture share common interest, values and behavior. It is
 measured in term of occupation, income, education, wealth. Social class
show distinct brand preferences for goods and services.

FACTORS INFLUENCING CONSUMER BEHAVIOR

SOCIAL PERSONAL PSYCHOLOGICAL CULTURAL

FAMILY AGE MOTIVATION CULTURE

INFLUENCE
LIFE STYLE PERCEPTION SUB CULTURE
REFERENCE
OCCUPATION LEARNING SOCIAL CLASS
ROLE
ECONOMIC BELIEF
STATUS CIRCUMSTANCES
ATTITUDE
PERSONALITY

DIFFERENT BUYING BEHAVIOR: There are four types of buying behavior based on
two conditions namely:
i. Involvement of customer
ii. Brand differences. This can be seen as below

Complex buying Variety seeking

Behavior buying behavior

Dissonance reducing Habitual buying

Buying behavior Behavior

1. Complex Buying behavior: It is a situation in which

  Consumers are highly involved
 See significant difference in brands
 Product is expensive
 Purchase less frequently
 Example, buying a personal computer.

2. Dissonance reducing buying behavior: It is a situation in which,

 Consumers are highly involved,
 See little difference in brands,
 Expensive product,
 Less frequently purchased,
 Post purchase discomfort due to few disadvantage of product or advantage
of other product.
 Example, buying a carpet.

3. Habitual Buying Behavior: It is a situation in which,

 Low consumer involvement
 Little brand difference
 Less expensive product
 Purchase frequently
 Example: Salt

4. Variety seeking buying behavior: It is a situation in which,

 Low consumer involvement
 Significant brand difference
 A lot of brand switching for variety and not dissatisfaction
 Example, Purchase of cookies, toothpastes.

SERVICE MARKETING TRIANGLE

In order to be successful service organization must undertake three types of marketing

and all three relate to keeping promise to customer.
This can be seen as below:

Thus there are three types of marketing viz.,

 Internal marketing
 External marketing
 Interactive marketing

i. Internal Marketing: The Company does internal marketing to its employees. The
company has to provide space, facilities, and equipment’s. The company has
to recruit staff, train and motivate them. The internal marketing enables the
promise. Employee satisfaction is the key factor in internal marketing. The
company will not be successful unless employees are willing to deliver on the
promise.
ii. External Marketing: The Company does external marketing on its customer. It
promises benefits, explains features and assures satisfaction by way of
 advertisement and other means of communication. It is nothing but marketing
function of the organization. It is anything that is communicated to the customer
before service delivery.
iii. Interactive Marketing: The service provider does interactive marketing with the
customer. The provider is one who interacts with the customer. The provider is
the face of the company and represents the company. It is at this point the
service is delivered. The provider keeps the promise made by the company to
the customer.

Thus the key to achieving sustainable competitive advantage in

today’s market is serving customers in excellent fashion (i.e.,
internal and interactive marketing) rather than merely selling
to them (i.e., external marketing)

Chapter-4: Service Marketing mix

Marketing is performed within a certain environment which itself is always changing.
The marketing activities have, therefore, to change accordance with environmental
changes. In order to appreciate this process it is easier to divide the marketing
activities into four basic elements, which are together referred to as the marketing mix.
These four basic elements are:
a. Product,
b. Price
c. Place,
d. Promotion
As all these four start with the letter `P' they are, at times, referred to as the four Ps of
the marketing mix or the 4Ps in marketing. The word product stands for the goods or
services offered by the organization. Price refers to the money value that the customer
has to pay. The product has to be adequately priced. This involves considerations of
the profit margin, the cost, the possibility of sales at different prices and the concept
of the right price.
Promotion is the aspect of selling and advertising, or communicating the benefits of
the product or service, to the target customers or the market segment involved in order
to persuade them to purchase such products or services. It includes selling through
advertising as well as the sales force. Besides, a certain amount of promotion is done
through special seasonal discounts, competitions, special price reductions, etc.
collectively called sales promotion. Finally, physical distribution refers to the aspect of
the channels of distribution through which the product has to move before it reaches
the consumer. It also includes the logistics aspects of distribution such as
warehousing, transportation, etc. Let us have a brief sketch of all these Ps.
1. Product
Product, in the marketing context is anything which is offered to the market for
exchange or consumption. In goods marketing it is always said that, there is a tangible
component to which some intangibles like style, after sales service, credit, etc., are
integrated. In the case of services, on the contrary, the tangible component is nil or
minimal. Conventionally, it is said a product as an object, which is developed,
produced, delivered and consumed. However, in services there is no or a little tangible
element. Therefore, the services are considered to be as benefits which are offered to
the target market.

Philip Kotler identified five levels of products, they are –

Developing new services
In order to develop a service product, as a manager you will have to follow the following
stages:
i) - Customer Benefit Concept: The service product which is offered in the market place
must have its origin in the benefits which the customers are seeking
ii) Service Concept: Using the customer benefits as the starting point, the service
concept defines the specific benefits which the service offers
iii) Service Offer: Having defined the business in which you are operating, the next
step is to give a specific shape and form to the basic service concept.
iv) Service Forms: In what form should the services be made available to the
customers is another area of decision-making
v) The service delivery system – It is the mode of service dissemination.
Choosing a brand name for a consumer product or service is one of the most important
decisions. A well-chosen brand name can provide a number of specific advantages to
the organization. These include suggesting product benefits, evoking feeling of trust,
confidence, and security and simplifying shopping. The American Marketing
Association defines a brand as follows: 'A brand is a name , term, sign, symbol, or
design, or a combination of these, intended to identify the goods or services of one
seller or group of sellers and to differentiate them from those of competitors.
2 Pricing.
In the case of products, the term 'price' is used for all kinds of goods- fruits, clothes,
computers, building etc. but in the case of services, different terms are used for
different services. The following table shows the term used for some selected services.

Pricing and Service Characteristics

In determining the prices of services, the one characteristic which has great impact is
their perishability and the fact that fluctuations in demand cannot be met through
inventory. Hotels and airlines offering low rates in off-season are examples of how
pricing strategy can be used to offset the perishable characteristics of services.
Another characteristic of services that creates a problem in price determination is the
high content of the intangible component. The higher the intangibility, the more difficult
it is to calculate cost and greater the tendency towards no uniform services, such as
fees of doctors, management consultants, lawyers. In such cases, the price may
sometimes be settled through negotiation between the buyer and seller.
The third characteristic to be kept in mind while determining prices is that in many
services, the prices are subject to regulations, either by the government or by trade
associations. Bank charges, electricity and water rates, fare for rail and air transport
in India are controlled by the government. In all such cases, the producer has no
freedom to determine his own price. The two methods which a service organisation
may use to determine prices are cost-based pricing and market-oriented pricing. In the
former, the price may be regulated by the government or industry association on the
basis of the cost incurred by the most efficient unit. Such a pricing strategy is effective
in restricting entry and aiming at minimum profit targets. The market-oriented pricing
may either be a result of the competition or customer oriented.
In case of competition-oriented pricing, the price may be fixed at the level which the
competitor is charging, or fixed lower to increase market share. Customer oriented
pricing varies according the to customer's ability to pay.
Role of Non-monetary Costs
Non-monetary costs refer to the sacrifices perceived by the consumers, other than
monetary costs, when buying and using a service. Many a times the non monetary
costs may become even more important than monetary costs. The nonmonetary costs
can be broadly divided into the following categories Time Costs- The time required by
a consumer would include actual time of interaction with the service provider as well
as the waiting time. Therefore, the consumer is not only spending his money but also
sacrificing his time.
Search Costs: These involve the efforts put in by the consumer in searching
information, finding out alternatives and evaluating them. Typically search costs are
far greater in case of services as compared to goods
Psychic Costs: These include fear of not understanding or fear of rejection or fear of
uncertainty.
3. Place or Distribution
The most important decision element in the distribution strategy relates to the issue of
location of the service so as to attract the maximum number of consumers. The
inseparability characteristic of service such as those of doctors, teachers, consultants,
mechanics etc. poses a distribution constraint since they are able to serve only a
limited, localised market. The other characteristic of services which affects the
distribution strategy is the fixed location of services such as universities, restaurants,
and hospitals which necessitates the customer to go to the service location rather than
vice-versa.
Methods of distribution in Services
Distribution in services can be broadly classified into two categories- direct sales and
sales via intermediaries.
1) Direct Sales
Direct sales has specific marketing advantages as they help in maintaining better
control over how the service is provided or performed and also in obtaining direct
feedback from customers. There are obvious problems also in direct sales, like;
problems of expanding the business and coping with high workloads where the
services of a particular individual may be in demand or direct sale means limited
geographic market coverage. The following are the means of direct sales method.
a) Direct Sales through Electronic Channel
To overcome location problems, companies are exploring possibilities of direct sales
through electronic channels. The typical benefits the companies see in electronic
distribution of services are:
-Consistent delivery for standardized services
- Low cost
- Customer convenience
- Wide distribution
b) Franchising
Franchising is the granting of rights to another person or institution to exploit a trade
name, trade mark or product in return for a lump-sum payment or a royalty. Franchise
is characterized by the following features:
a) Ownership by one person of a name, an idea, a secret process or specialized piece
of equipment and the goodwill associated with it.
b) The grant of a license by that person to another permitting the exploitation of such
name, idea process or equipment and the goodwill associated his rights.
c) The inclusion in the license agreement of regulations relating to operation of the
business in the conduct of which the licensee exploits his rights.
d) The payment by the licensee of a royalty or some other consideration for the rights
that are obtained
c) Quasi Retailing
The quasi-retail outlets, sell services rather than goods, like Hairdressers, Amusement
arcades Travel Agents, Employment agencies, Car hire agencies, Hotels,
Restaurants, Driving Schools.
2) Sales via Intermediaries
Majority of the goods are services are made available to the customers through
intermediaries. The following are the dominating intermediaries in the market.
Key Issues Involving Intermediaries
The following are the major issues which should be addressed before hand in deciding
the distribution strategy involving intermediaries
- conflict over objectives and performance
- conflict over costs and rewards
- control of service quality
- empowerment versus control
- channel ambiguity
A service organization can develop an effective channel system if it helps the
intermediary to develop customer-based service processes by providing the required
support. Also through training it may develop the intermediary to deliver service quality
and gradually move to a cooperative management system and controls.
Agent: An agent is an independent intermediary, who may act in the name of, or for
a principal. His contract will define these provisions along with territorial rights,
exclusivity and sales commissions.
Broker: A broker is an independent intermediary between buyer and seller who bring
parties together to facilitate the conclusion of sales contract. A broker may have
continuing relationship for his client under a contract period; for which he may charge
fee for assistance.
Alternately, a broker may be for a special job to be undertaken.

4) Promotion
Promotion mix, as it is mentioned the aspect of selling and advertising, or
communicating the benefits of the product or service, to the target customers or the
market segment involved in order to persuade them to purchase such products or
services.
Promotion Objectives
 Develop personal relations with client (personal relations might result in
satisfaction, more than their service offer).
  Make a strong impression of competency, honesty and sincerity (professional
orientation to service transaction so as to win buyers confidence in sellers
abilities to deliver the services).
 Should be able to use indirect selling techniques (creating derived demand or
act as a buying consultant).
 Manage to maintain a fine image by positive word of mouth.
 Packaging and customization.
The Guidelines which can be kept in mind while promoting services are as follows
 use simple, clear messages;
 emphasis the benefits of service;
 promise only that which can be delivered and do not exaggerate claims;
 build on word-of-mouth communication by using testimony of actual consumers
in advertisements; and
 provide tangible clues to services by using well-known personalities or objects
to help customers identify the service.
Target Audience
While defining the objectives of the communication campaign, the target audience is
to be cleared. In service sectors there is a direct contact between the person who
provides the service and the customers.
Therefore, some amount of promotion should be targeted at the employees so as to
motivate them to serve the customer better. In such communications the objective can
also be to educate the employees about how to handle operational problems so as to
increase their performance level.
Promotion Mix
Advertising
Advertising is any kind of paid, non-personal method of promoting by an identified
organisation or individual. Certain services such as entertainment (cinema, theatre),
passenger and freight transport (roadways, airlines, trains), hotel, tourism and travel,
insurance have been advertising heavily in newspaper, magazines, radio, TV to
promote greater usage and attract more customers. However, certain service
professionals such as doctors, accountants, and lawyers, have rarely used advertising
as a means of increasing their clientele.
Objectives of advertising have been identified as:
  creating an understanding of the company in the customers' minds by
describing the company's services, activities and its areas of expertise
 creating a positive image for the company
 building a strong sense of identification with the customer by turning his needs,
values and attitudes
 creating a positive background for the sales people to sell the services by
providing all relevant information about the company.
Word of Mouth (WOM)
Word of mouth plays an important role in promoting services. Services are adopted, if
not more, as much because of word of mouth communications as because of active
promotion by marketers. However, people seldom pass on information about a product
or service without some reasons. Managers who want to take advantage of word of
mouth communication should make specific efforts in this direction. Given below are
some suggestions for stimulating a positive word of mouth (apart from providing
excellent service quality)
-Offering a gift, discount or other reward to customers who bring in new customers.
-Asking customers who express satisfaction, to tell their friends.
-Running a newsletter and asking customers to contribute. Contribution may be in
terms of
letters, stories or ideas. This can also be done through website.
-Reward your regular customers with some freebies.
-Target opinion formers.
3 Additional Ps of Service Marketing
For service sector, it is observed that the traditional marketing mix is inadequate
because of three main reasons. The first reason is that the original marketing mix was
developed for manufacturing industries, which implies that the services offered by
service companies ought to be changed in a more product like manner so that the
existing marketing tools can be applied. The second reason is that the marketing
practitioners in the service sector found that the marketing mix does not address to
their needs. They observed that the services have certain basic characteristics, which
in turn have marketing implications. For example there is a problem as regard to
maintaining the quality due to lack of standardization or services can't be inventoried,
patented or transferred. The third reason is that since services are basically different
in comparison to physical products the marketing models and concepts have,
therefore, to be developed in direction of the service sector. In order to solve these
problems, 3 more additional Ps were developed. They are –
1. People
2. Physical evidence, and
3. Process.

Let us have a brief description of each of them.

1. People
People constitute an important dimension in the management of services in their role
both as performers of service and as customers.
a. Performers of service / Service Personnel
Service Personnel are important in all organizations but more so in an organization
involved in providing services. The behavior and attitude of the personnel providing
the service is an important influence on the customers' overall perception of the service
and he can rarely distinguish between the actual service rendered and the human
element involved in it.
Service personnel are two types- visible service personnel and non-visible service
personnel.
In a restaurant the waiters are visible while the cook in the kitchen is not. As a
marketing manager you have to devote more time training the visible personnel, since
they have greater responsibility in maintaining relations with the customer. The rice
dish which is not cooked properly is the cook's fault but it is the waiter who will have
to bear the brunt of the customers' anger. The manner in which the waiter behaves
with the customer will be an important determinant in the restaurant losing that
customer forever or retaining him as a regular client. As a marketing manager your
primary concern is the visible service personnel.

c. Customers
Customers are important because they are a source of influencing other customers.
In the case of doctors, lawyers, consultant’s one satisfied customer will lead to a chain
reaction, bringing in his wake a number of other customers. Thus as a marketing
manager, your first task should be to ensure complete satisfaction of the existing
customers. The kind of customers that you attract exerts an important influence on
prospective customers. The prospective customer may feel attracted towards the
organization (it may be a restaurant, club, school, college) because it has his 'type' of
customer.

2. Physical Evidence
Physical evidence is the atmosphere where the service is being delivered from. For
example, Cleanliness in doctor's clinic, exterior appearance and interior decor of
restaurant, the comfort of the seating arrangement in a cinema hall, adequate facility
for personal needs at the airport all contribute towards the image of the service
(organisation) as perceived by the customer. The common element in these is that
they are all physical, tangible and controllable aspects of a service organisation. They
constitute the physical evidence of the service. There may be two kinds of physical
evidence:
1. peripheral evidence, and
2. essential evidence
Peripheral evidence is actually possessed as a part of the purchase of service but by
itself is of no value. Airline ticket, cheque book, receipt for a confirmed reservation in
a hotel are examples of peripheral evidence. A cheque book is of value only if you
have money in the bank-without that it is of no significance. Peripheral evidence adds
on to the - value of essential evidence. In a hotel you may find matchbox, writing pad,
pen, complimentary flowers and drinks, which you may take away. These are
Representations of peripheral evidence. Peripheral evidence is possessed and taken
away by the customer, but essential evidence cannot be possessed by the customer;
the building, its size and design, interior layout and decor, logo and mnemonic device
of the organisations are constituents of the essential evidence. The essential evidence
is a very critical input in determining the atmosphere and environment of the service
organisation.
It is the duty of a marketing manager to manage the physical evidence in order to
create the ideal environment for the service. It can be done in two ways: one by making
the service more tangible, and two, by making it easier for the customer to grasp the
concept of the service.
One obvious way of making the service more tangible is by developing a tangible
representation of the. Service as is done in case of credit cards. Credit cards have a
physical entity and are identifiable by their brand name and distinct looks of the card.
Other ways by which a service can be made more tangible is by standardizing the
physical attributes such as location, interior decor, colour scheme etc. Most airlines
use a dress for all their staff to help create a sense of a uniformity.
The second way is to make it easier for the consumer to understand the concept of
the service which you are offering with easily perceived objects and ideas. Promoters
of package tours may provide detailed information about the hotel, food and transport
facility they would be using to help the consumers understand the concrete dimensions
of the tour and thus reduce their anxiety arising out of uncertainty. Information which
helps reduce uncertainty and provides specific: information about the various
dimensions of the service should be provided to prospective consumers.
3. Process
In a service organization, the system by which you receive delivery of the service
constitutes the process. For example, in fast food outlets the process comprises
buying the coupons at one counter and picking up the food against that at another
counter. Services can be described on the basis of the types of processes used in the
delivery of the services.
There are three kinds of delivery processes that are applicable in case of service
products. They are line operations, job shop operations and intermittent operations.
Self service restaurants are examples of line operations. The consumer moves
through logically arranged operations which are arranged in a sequence. When the
consumers require a combination of services using different sequences, the job shop
type of operation is more useful. Hospitals, restaurants and educational institutions
usually have this type of delivery process. In a hospital, some patients need only
consultation in the Out Patient Department, some others may need consultation as
well as medication or X-ray, some patients require hospitalization or surgery,
medication or investigations. All these categories of consumers require a different
combination of dishes. A college may offer courses for full-time students as well as for
working people through correspondence. Firms offering consultancy for projects use
this kind of delivery system. Advertising agencies also use the intermittent delivery
system since each advertising campaign requires a unique set of input factors.
A manager has to take interest in optimizing the efficiency of the organization without
sacrificing the qualitative aspect. Some of the critical questions you need to focus upon
are
 What are the steps involved in delivering the service to the consumer?
 Are they arranged in the most logical sequence?
 If not, can some steps be eliminated, combined or rearranged to form a
smoother sequence?
 What are the steps in which the consumer is involved?
 Can the consenters' contact be reduced or totally eliminated?
 Can we introduce automation to speed up the delivery process?
 Chapter-5: Service Guarantees and Service Encounters

SERVICE GUARANTEES

One way of improving the image of the service organization and to improve the
quality of services is to provide service guarantee to customers. Service guarantee is
as much financial consequences as it means refunding the amount to the customers.
Service guarantee will help organization to deliver superior service quality.

REASONS: The reasons for service guarantee are:

 Focus on customer: It makes organization to focus on customer i.e., what

customer really wants from the service provider.
 Sets clear standards: It makes organization to set clear quality or service
standards. For example, Dominos promises delivery within 30 minutes, late
delivery implies high discounts.
 Provide feedback: It provides customer feedback as they complain due to
service failure. They complain because they had an idea about the promise or
service standards.
 Reasons for failure: Customer feedback helps in finding out the possible
reasons for failure. Finding out the causes and removing them is best way of
improving quality.
 Builds strong marketing: It provides organization an opportunity to improve its
marketing due to spread of word of mouth.

CRITERIA: However the criteria of good service guarantees are:

 {I} Must be unconditional: Service guarantee should be without any conditions or
hidden costs.
{II} Easy to understand and communicate: Guarantee should be well defined and
communicated to customer. Our services are prompt. This is not clear to
customers.
{III} Meaningful: Service guarantee should be meaningful. It should be in proportion
to the cost of service.
{IV} Easy to invoke: It should be easier for a customer to make claims to the
authority regarding the service guarantee.
{V} Easy to collect: There should not be long and lengthy procedure for claims. It
should be one window scheme for refund and claims.

BENEFITS OF SERVCE GUARANTEES: The various benefits of service guarantees

are

{I} It generates higher sales.

{II} It provides customer feedback.
{III} It improves delivery system.
{IV} It provides customer satisfaction.
{V} It creates service oriented culture.
{VI} It improves brand image of the company.
{VII} It improves competitiveness of the firm.

SERVICE ENCOUNTER

It is defined as “any episode in which the customer comes into contact with any
aspect of the organization and gets the impression of the quality of services”. It
takes place any time and at any place. It can take the form of

REMOTE PHONE FACE TO FACE

 Withdrawing money from Enquiry on phone Direct contact between
ATM customer and service
provider
Physical evidence is Efficiency of service Verbal/ Non verbal/
important provider is important Physical evidence is
important

The elements of service encounter are:

{I} The Customer: It is for him that the service offer has been designed.
{II} The Service Provider: It includes internal marketing and external marketing
people. If employees are happy they will take care of the customer.
{III} The Delivery System: It includes the process and steps involved in service
delivery system.
{IV} The Physical Evidence: These are the elements of service design which
provides some tangible clues of the service offer.

CHARACTERISTICS OF SREVICE ENCOUNTER: The characteristics of service

encounter are;

i. It is purposeful: There is always a definite goal and purpose in all service

encounters.
ii. Exchange of information: There is exchange of information so that the service
transaction takes place successfully.
iii. Service providers are not altruistic: Service providers are not someone else.
They are very much part of the encounter and they consider as their duties for
which they are paid.
iv. Limited scope: It has limited scope. It is related to specific task or transaction.
v. Prior acquaintance not necessary: Service provider and customer are stranger
to each other. There is no need of prior acquaintance.
 Examples of service encounters:

 Seeing an advertisement of the firm

 Having telephone enquiry
 Impression while waiting in queue
 The experience of the service.

ZONE OF TOLERANCE (ZOT)

The inherent nature of services makes consistent service delivery difficult for
all employees in the same company and even for the same employee from one
day to another. The extent to which customers are willing to accept this variation
is called ‘Zone of Tolerance’. It falls between desired service and adequate
service.
This can be seen as below:

Explicit and Implicit service

Personal needs
promise

Word of Mouth
Belief about Desired service
Past Experience
what is possible

Z
O
T
Perceived service
alterations Predicted services
Adequate service

Situational factors
Desired service: It is the type of service customer hopes to receive. It is an ideal level
what customer thinks to be delivered to them in the context of their need. However
most customers are realistic and understand that companies cannot deliver desired
services and hence they expect some level of service as adequate level

Adequate service: It is the minimum level of service which customer will accept without
being dissatisfied. This depends on situational factors and perceived service
alterations.
A performance that falls below the adequate service will cause frustration and
dissatisfaction and the performance that exceeds adequate service will surprise
customer (customer delight).
ZOT may increase or decrease for individual consumer depending upon the factors
such as competition, price and importance of service attributes. The desired level and
adequate level may also expand or contract for a customer. For example, an airline
passenger who is running late will have narrow ZOT and another passenger who has
reached airport much earlier may have high ZOT. For passenger who is running late
a minute seems much longer and his adequate service level increases.

Core And Supplementary Services

Services can be classified as core services and supplementary services. Core

service is that service which satisfies the basic and important needs of the
customer. Supplementary services are services which are provide additional
benefits to customer. Supplementary services enhance the benefits of core
services. This can be seen as below:

A bed in the hotel

(Core service)

Reservation Room Service Entertainment Restaurant

Cashier
 A bed in the hotel is core service and other facilities like Reservation, Room service;
Entertainment, Restaurant and Cashier are supplementary services.

Christopher Lovelock has identified eight clusters of supplementary services. These

are:
{I} Information: Customer needs information about the services and other details
like price, instructions, payment options, etc.
{II} Consultation: Service provider must advice customer in a customized way after
finding out customer’s needs and requirements.
{III} Order taking: It covers recording details from consumers and confirming,
making reservation, giving proper schedule, etc.
{IV} Safe keeping: It includes safekeeping of all valuables of customers. Example,
safe transporting luggage of customer.
{V} Exceptions: It means satisfying the special needs of customers. Example,
serving a low salt meal on a flight.
{VI} Hospitality: It means taking care of the customer, providing friendly
environment.
{VII} Billing: A service company must provide proper billing system to the customer.
{VIII} Payment: Bill payment system should be easy and convenient to all customers.
However, the focus should be first on core services and then supplementary
services. Organizations can create more value by increasing the variety of
supplementary services.

MARKETING CHALLENGES OF SERVICES

Service marketing is more challenging than product marketing because of the inherent
nature of services. This can be seen as below:
[1] Intangibility: The intangibility of services create following implications
 Customer cannot see, touch or feel
  No possibility of impulse purchase
 No measurement of quality
 No transfer of ownership
 Cannot be patented
 Pricing is difficult
 Cannot be stored
The solution is (ways to overcome)
 Focus on benefits and visualization
 Use brand name and association
 Physical representation (increased tangibility)
 Documentation
 Presenting facts and figures

[2] Perishable: The perishable nature of services create following implications

 Cannot be stored, packed, or transferred.
 Demand fluctuates from time to time
 No possibility of delayed sales
 Simultaneous production and consumption
The solution of this problem is:
 Over marketing (example, tele marketing)
 Managing demand
 Managing supply

[3] Inseparable: The inseparable nature of services create following implications

 Need presence of both consumer and producer
 Only direct sales are possible
 Limited scale of operations
 Limited market geographically
Solution to this problem is
 Giving proper training to internal customers
 Video conferencing/ satellite conferencing.
 Making operations fully automatic
 [4] Heterogeneous/ variability: The heterogeneous feature of service results in the
following implications
 Difficult to standardize
 Inconsistency in service offer.
 Cultural differences between staff and customer.

The solution to this problem is;

 Training of internal customers
 Proper recruitment and selection of internal customers
 Training of external customers
 Automation

[5] Ownership: This feature of service create the following implications/ problems
 Customer cannot return back the service
 Ownership cannot be transferred
Solution:
 Focus on advantages of non-ownership
 Membership scheme

Thus service marketing is more challenging and complex. It requires different

marketing strategies and different marketing mix. It is much broader than product
marketing. Service marketing environment is much dynamic than product marketing
environment. The management function of a manufacturing organization cannot
directly be transferrable to service organization. The service organization cannot get
customer if it adopts traditional channels of distribution. The new features that can be
identified for marketing of services are:

{I} People are important: For the marketing of services it is the frontline employee
that holds a complete responsibility of either success or failure in service
delivery. Therefore companies must train the frontline staff in customer handling
and customer relationship.
{II} Needs different skills: The service provider must deliver satisfaction the way
his customer wants it. Therefore service marketing needs different skills into
 the art of handling the customer. Train people in skills to understand customer
expectations
{III} Different organization structure: Service marketing need different
organizational structure than product marketing. In product organizational
structure the top level is narrow because the top management does not get into
regular contact with customer but in service organization customer comes in
direct contact with service provider. The necessity of physical evidence requires
that the customer is present at the time and place of delivery. The customer is
the king here and all decisions need to be taken keeping his convenience in
mind. The new approach to service marketing rotates the pyramid by 360
degree to bring it virtually upside down. It identifies another very important
element that does not exist in the original pyramid- the service customer.
{IV} Need different approach to pricing: Pricing of services is very difficult task
due to intangible nature of services. It becomes difficult to educate the customer
on the cost factor involved in price component. Even it is difficult for customers
to compare price of different services. It is subjective.
{V} Needs different marketing mix: Services need different marketing mix.
Service involves customer involvement, service provider, physical evidence,
delivery system. Thus due to the inherent nature of services the marketing mix
(4 P’s) is not sufficient and there is need of additional marketing mix.
{VI} Need interactive marketing: Service marketing is interactive marketing. It
involves all the elements of marketing trinity that is management, employees
and customers. It involves internal marketing, external marketing and
interactive marketing.
QUESTIONS

{I} EXPLAIN THE FOLLOWING CONCEPTS:

i. Services
ii. Intangibility of services
iii. Consumer behavior
iv. Service marketing trinity
v. Service encounter
vi. Zone of tolerance
vii. Buying roles
viii. Perishability of services
ix. Inseparability of services
x. Product service continuum

{II} ANSWER THE FOLLOWING QUESTIONS:

i. Explain the features of services
ii. Explain the role of services in an economy with reference to India
iii. Explain factors responsible for the development of services
iv. Explain how services can be classified. How this is useful in marketing
v. Describe service marketing environment.
vi. Describe consumer behavior
vii. Explain the service marketing trinity
viii. Describe core and supplementary services
ix. Describe buying roles
x. Service marketing is more complex and challenging. How marketers can
overcome this challenge.
xi. What do you mean by services? How do services differ from products?
xii. Do you think that classification of services helps in developing the marketing
strategy better? How?
xiii. Discuss the important characteristics of services with suitable examples. Also
discuss what challenges they pose before service marketers.
xiv. Discuss the reasons of growth of service sector.
xv. Write a detailed note on role of service sector in economy.
xvi. What do you think are the main reasons for including the element of ‘People’ in the
marketing mix for services?
xvii. Do you think ‘physical evidence’ really matters in marketing of services? Explain.
xviii. Explain the ‘process’ as one of the important element of marketing mix with
suitable examples.
 xix. Describe search, experience and credence attributes and give examples of each.
xx. Explain why services are often harder for customers to evaluate than physical
goods.
xxi. Discuss the three stages in the purchase process for services.
xxii. Elaborate the various steps involved in consumer decision making process for
services.
xxiii. Identify the kinds of role that are played in services purchase process. Also write
important factors influencing consumer behaviour
xxiv. Discuss the components of external marketing with suitable illustrations.
xxv. Write a detailed note on themes of external marketing campaigns.
xxvi. Explain the various roles of employees in service performance with suitable
examples.
xxvii. What are important components of internal marketing?
xxviii. Write short notes on:
 Employee behaviour and service quality.
 Word of mouth communication.
 Need of external and internal marketing
xxix.

KEYWORDS
 Marketing Mix: Set of tools with the help of which marketing exercise is undertaken and
is comprised of 4 Ps namely Product, Price, Place and Promotion. In case of services, three
more Ps can be added – People, Process and Physical evidence.
 People: Refers to all the human beings who play part in service creation and delivery
process.
 Physical Evidence: The environment in which the service is delivered and where the firm
and customer interact and any tangible component that facilitate the performance of the
service.
 Process: Actual procedure, mechanism and flow of activities by which the service is
delivered.
 Culture: A set of beliefs, norms, values and customs.
 Perception: It is the process by which buyers select, organize and interpret information into
a meaningful impression in their minds.
 Attitude: It is a learned predisposition to respond in a consistently favourable or
unfavourable manner with respect to an object. Motivation: It the driving force within
individuals that impels them to act in a particular direction.
 Personality: It can be described as the psychological characteristics that determine how an
individual will react to his or her environment.
 Life style: It is a person’s distinct pattern of living and is generally expressed in his/ her
activities, interests and opinions.
 External Marketing: The efforts of the marketers directed at the final consumers that are in
form of marketing mix – 7 Ps).
 Internal Marketing: Internal marketing encompasses the service organization’s efforts
directed at the employees because customer satisfaction depends upon employees’
satisfaction.
 Interactive Marketing: Interactive marketing focuses on managing the interaction of the
service organization with the customers because the customer satisfaction depends as
much on interaction as on what service is delivered to them.