What is service marketing?

A service is any act of performance that one party can offer another that is essentially
intangible and does not result in the ownership of anything; its production may or may
not be tied to a physical product.
Services are deeds, processes, and performances provided, coproduced, or cocreated by
one entity or person for and/or with another entity or person.
What are services?

Services are deeds, processes and performance provided or co-produced by one entire or
person for another entity or person. Service sector has attracted significant foreign
investment flows, contributed significantly to exports as well as provided large-scale
employment. The services offered are not tangible things that can be touched, seen and
felt, they provide intangible things for the customers which are co-produced.
Service industry service as a product, customer service, and derived service
It is important to draw distinction between service industry and companies, service as a
product, customer service and derived service.
Service industries and companies
An industry made up of companies that primarily earn revenue through providing
intangible products and services. Service industry companies are involved in retail,
transport, distribution, food services, as well as other service-dominated businesses. Also
called service sector, tertiary sector of industry.
Service as a product: Service as a product it’s an approach when you “productize” your
service by turning it into a step-by-step process which provides predictable results and
easy to follow, ideally can be automated. Turning a service into a product allows you to
create a recurring revenue stream, reach a larger audience and scale your business.Even
better you productize a solution to a problem that your clients are willing to pay for on a
recurring basis.
Customer Service: It is the service provided in support of companies core products.
Companies typically do not charge for customer services. Customer services can occur
onsite, or it can occur over the phone or via internet through chat in real time.
Derived Service: are the value derived from physical goods is really the service
provided by the good, not the good itself. All products and physical goods are valued for
the services they provide. Customer service is the service provided in support of the
company’s core product.
Examples of Service Industries
Health Care, Professional, Services, Financial Services, Hospitality, Travel, Others

4. Tangibility Spectrum

Products and services may be ranked according to their tangibility. Salt is shown as being
highly tangible, while teaching is shown to be least tangible. The point of this
classification is that the concepts presented in the services marketing literature are
especially significant to the services that are least tangible, such as teaching.
Why do firms focus on Services?
 Services can provide higher profit margins and growth potential than products
 Customer satisfaction and loyalty are driven by service excellence
 Services can be used as a differentiation strategy in competitive markets

Why are all these companies choosing to focus on services?

There are a number of reasons.
 First, the commoditization of products in many industries has resulted in price
and margin pressures on many physical goods. Services can help firms to
customize their offerings, adding value for customers.
 Second, customers are demanding services and solutions, especially in business-
to-business markets. In many situations, customers demand a solution to their
problem or challenge that involves multiple products and services. They look to
their providers to create and deliver these product service solutions.
  Third, services often have higher profit margins than products and can thus
provide platforms for firm profitability. Customer loyalty and customer
satisfaction are driven in large part by service quality and service offerings.
WHY SERVICE MARKETING?
Service-Based Economies:
The service economy of the United States has become ever more important for economic
growth and prosperity. Service marketing concept and strategies have developed in
response to the tremendous growth of service industries, resulting in their increased
importance to the U.S. and world economics. In 2009 the service sector represented more
than 80% of the total employment and 75% of the gross domestic product of the United
Sates. There is a growing market for services and increasing dominance of services in
economies worldwide.
Service as a Business Imperative in Goods-Focused Businesses

Early in the development of the field of services marketing and management, most of the
impetus came from service industries such as banking, transportation, hospitality, and
health care. As these traditional service industries have evolved and even more
comparative, the need for effective service management and marketing strategies has
continues. Now, however, companies across industries have discovered the value of
service innovation and service growth strategies. All companies have realized that an
excellent product is not a guarantee for long term success. For example Xerox now
provides a document management service, whereby it can take over the management of all
documents within an organization. This type of service lies far beyond its typical printer
repair and maintenance service business.
Deregulated Industries and Professional Service Needs
Specific demand for service marketing concepts has come from deregulated industries
and professional services as both these groups have gone through rapid changes in the
way the do business. In the past several decades many very large service industries
including airlines, banking, telecommunication, and trucking have been deregulated by
the U.S government. Similar deregulation moves have taken place in many other
countries as well. As a result, marketing decision that used to be tightly controlled by
government are now partially or in some cases totally controlled by individual firms.
Service Marketing Is Different
Marketing a good isn’t the same as marketing a service. The customer can touch carpet,
but not the act of cleaning it — and that’s an important difference. Nearly all products are
a bundle of goods and services. When a customer purchases a car, he’s also purchasing a
warranty. Nonetheless, there are products, such as cleaning, that are nearly pure services.
Services are intangible. Because the consumer doesn’t see the cleaning process, it’s more
difficult for the marketer to leave an impression than it is with a handsome Persian rug.
The promotion needs to associate the service with the image of an object.
Service Equals Profits:
In the final decades of the 20th century, many firms jumped on the service
bandwagon, investing in service initiatives and promoting service quality as
ways to differentiate themselves and create competitive advantage. Many
of these investments were based on faith and intuition by managers who
believed in serving customers well and who believed in their hearts that
quality service made good business sense. Indeed, a dedication to quality
service has been the foundation for success for many firms, across
industries.
CHARACTERISTICS OF SERVICES
There is general agreement that differences between goods and services
exist and that the distinctive characteristics
Intangibility
The most basic distinguishing characteristic of services is intangibility.
Because services are performances or actions rather than objects, they
cannot be seen, felt, tasted, or touched in the same manner that you can
sense tangible goods. For example, health care services are actions (such as
surgery, diagnosis, examination, and treatment) performed by providers and
directed toward patients and their families. These services cannot be seen
or touched by the patient, although the patient may be able to see and
touch certain tangible components of the service (like the equipment or
hospital room).
Resulting Marketing Implications Intangibility presents several marketing
challenges. Many services cannot be inventoried due to capacity
constraints, and therefore fluctuations in demand are often difficult to
manage. For example, there is tremendous demand for resort
accommodations in Phoenix in February but little demand in July. Yet resort
owners have the same number of rooms to sell year-round.
Services cannot be easily patented, and new service concepts can therefore
easily be copied by competitors. Services cannot be readily displayed or
easily communicated to customers, so quality may be difficult for consumers
to assess. Decisions about what to include in advertising and other
promotional materials are challenging, as is pricing. The actual costs of a
“unit of service” are hard to determine, and the price– quality relationship is
complex.
Heterogeneity
Because services are performances, frequently produced, consumed, and
often cocreated by humans, no two services will be precisely alike. The
employees delivering the service frequently are the service in the
customer’s eyes, and people may differ in their performance from day to
day or even hour to hour. Heterogeneity also results because no two
customers are precisely alike; each will have unique demands or experience
the service in a unique way.
Resulting Marketing Implications Because services are heterogeneous
across time, organizations, and people, ensuring consistent service quality is
challenging. Quality actually depends on many factors that cannot be fully
controlled by the service supplier, such as the ability of the customer to
articulate his or her needs, the ability and willingness of personnel to satisfy
those needs, the presence (or absence) of other customers, and the level of
demand for the service. Because of these complicating factors, the service
manager cannot always know for sure that the service is being delivered in
a manner consistent with what was originally planned and promoted.
Sometimes services are provided by a third party, further increasing the
potential heterogeneity of the offering.
Simultaneous Production and Consumption
Whereas most goods are produced first, then sold and consumed, many
services are sold first and then produced and consumed simultaneously. For
example, an automobile can be manufactured in Detroit, shipped to San
Francisco, sold two months later, and consumed over a period of years. But
restaurant services cannot be provided until they have been sold, and the
dining experience is essentially produced and consumed at the same time.
Resulting Marketing Implications
Because services often (although not always) are produced and consumed at
the same time, mass production is difficult. The quality of service and
customer satisfaction will be highly dependent on what happens in “real
time,” including actions of employees, the interactions between employees
and customers, and interactions among customers themselves. Clearly the
real-time nature of services also results in advantages in terms of
opportunities to customize offerings for individual consumers. Simultaneous
production and consumption also means that it is not usually possible to
gain significant economies of scale through centralization. Often, operations
need to be relatively decentralized, so that the service can be delivered
directly to the customer in convenient locations, although the growth of
technology-delivered services is changing this requirement for many
services. Also because of simultaneous production and consumption, the
customer is involved in and observes the production process and thus may
affect (positively or negatively) the outcome of the service transaction.
Perishability
Perishability refers to the fact that services cannot be saved, stored, resold,
or returned. A seat on an airplane or in a restaurant, an hour of a lawyer’s
time, or space in a shipping container not used or purchased cannot be
reclaimed and used or resold at a later time. Perishability is in contrast to
goods that can be stored in inventory or resold another day, or even
returned if the consumer is unhappy.
Resulting Marketing Implications
A primary issue that marketers face in relation to service perishability is the
inability to inventory. Demand forecasting and creative planning for capacity
utilization are therefore important and challenging decision areas. The fact
that services cannot typically be returned or resold also implies a need for
strong recovery strategies when things do go wrong. For example, although
a bad haircut cannot be returned, the hairdresser can and should have
strategies for recovering the customer’s goodwill if and when such a
problem occurs.
Challenges and Questions for Service Marketers
Because of the basic characteristics of services, marketers of services face
some very distinctive challenges. Answers to questions such as the ones
listed here still elude managers of services:
How can service quality be defined and improved when the product is
intangible and nonstandardized?
How can new services be designed and tested effectively when the service
is essentially an intangible process and one that is frequently cocreated with
customers and networks of providers?
How can the firm be certain it is communicating a consistent and relevant
image when so many elements of the marketing mix communicate to
customers and some of these elements are the service providers
themselves? How does the firm accommodate fluctuating demand when
capacity is fixed and the service itself is perishable?
How can the firm best motivate and select service employees who,
because the service is delivered in real time, become a critical part of the
product itself?
How should prices be set when it is difficult to determine actual costs of
production and price may be inextricably intertwined with perceptions of
quality?
How should the firm be organized so that good strategic and tactical
decisions are made when a decision in any of the functional areas of
marketing, operations, and human resources may have significant impact on
the other two areas?
How can the balance between standardization and personalization be
determined to maximize both the efficiency of the organization and the
satisfaction of its customers?
How can the organization protect new service concepts from competitors
when service processes cannot be readily patented?
How does the firm communicate quality and value to customers when the
offering is intangible and cannot be readily tried or displayed prior to the
purchase decision?
How can the organization ensure the delivery and cocreation of consistent
quality service when both the organization’s employees and the customers
themselves can affect the service outcome?
SERVICE MARKETING MIX
The preceding questions are some of the many raised by managers and
marketers of services that will be addressed throughout the text through a
variety of tools and strategies. Sometimes these tools are adaptations of
traditional marketing tools, as with the service marketing mix presented
here.
Traditional Marketing Mix One of the most basic concepts in marketing is
the marketing mix, defined as the elements an organization controls that
can be used to satisfy or communicate with customers. The traditional
marketing mix is composed of the four Ps: product, place (distribution),
promotion, and price. These elements appear as core decision variables in
any marketing text or marketing plan. Careful management of product,
place, promotion, and price will clearly also be essential to the successful
marketing of services.
Expanded Mix for Services
Acknowledgment of the importance of these additional variables has led
service marketers to adopt the concept of an expanded marketing mix for
services. In addition to the traditional four Ps, the services marketing mix
includes people, physical evidence, and process.
People All human actors who play a part in service delivery and thus
influence the buyer’s perceptions: namely, the firm’s personnel, the
customer, and other customers in the service environment.
Physical evidence The environment in which the service is delivered and
where the firm and customer interact, as well as any tangible components
that facilitate performance or communication of the service.
Process The procedures, mechanisms, and flow of activities by which the
service is delivered, consumed, and cocreated—the service delivery and
operating systems.
In marketing, process refers to the steps that the consumer needs to go through to acquire the product. A
good example here is going to a hotel – where the process includes: booking the hotel, front desk interaction
and check in, getting keys, using credit, transfer of luggage, finding the room and so on.

Chapter no 3
Search, Experience, and Credence Qualities
One framework for isolating differences in evaluation processes between goods and
services is a classification of properties of offerings proposed by economists.36
Economists first distinguished between two categories of properties of products: search
qualities, attributes that a customer can determine before purchasing a product, and
experience qualities, attributes that can be discerned only after purchase or during
consumption. Search qualities include color, style, price, fit, feel, hardness, and smell;
experience qualities include taste, wearability, and comfort. Products such as
automobiles, clothing, furniture, and jewelry are high in search qualities because their
attributes can be almost completely determined and evaluated before purchase. Products
such as vacations and restaurant meals are high in experience qualities because their
attributes cannot be fully known or assessed until they have been purchased and are being
consumed. A third category, credence qualities, includes characteristics that the consumer
may find impossible to evaluate even after purchase and consumption.37 Examples of
offerings high in credence qualities are appendix operations, brake relinings on a car, and
computer software updates. Few consumers possess medical, mechanical, or technical
skills sufficient to evaluate whether these services are necessary or are performed
properly, even after they have been prescribed and produced by the provider. Figure 1.5
arrays products that are high in search, experience, or credence qualities along a
continuum of evaluation ranging from easy to evaluate to difficult to evaluate. Products
high in search qualities are the easiest to evaluate (left end of the continuum). Products
high in experience qualities are more difficult to evaluate because they must be purchased
and consumed before assessment is possible (center of the continuum). Products high in
credence qualities are the most difficult to evaluate because the customer may be unaware
of or may lack sufficient knowledge to appraise whether the offerings satisfy given wants
or needs even after usage and/or consumption (right end of the continuum). Most goods
fall to the left of the continuum, whereas most services fall to the right because of the
characteristics of services just described. These characteristics make services more
difficult to evaluate than goods, particularly in advance of purchase. Difficulty in
evaluation, in turn, forces consumers to rely on different cues and processes when
deciding upon and assessing services.