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CHAPTER 1
Services
Services are a special form of product which consists of activities, benefits or satisfactions offered for sale that are intangible and do not result in the ownership of anything.
Characteristics of Services
1. Intangibility: A physical product is visible and concrete. Services are intangible. The service cannot be touched or viewed, so it is difficult for clients to tell in advance what they will be getting. For example, banks promote the sale of credit cards by emphasizing the conveniences and advantages derived from possessing a credit card. 2. Inseparability: Personal services cannot be separated from the individual. Services are created and consumed simultaneously. The service is being produced at the same time that the client is receiving it; for example, during an online search or a legal consultation. Dentist, musicians, dancers, etc. create and offer services at the same time. 3. Heterogeneity (or variability): Services involve people, and people are all different. There is a strong possibility that the same enquiry would be answered slightly differently by different people (or even by the same person at different times). It is important to minimize the differences in performance (through training, standard setting and quality assurance). The quality of services offered by firms can never be standardized. 4. Perishability: Services have a high degree of perishability. Unused capacity cannot be stored for future use. If services are not used today, it is lost forever. For example, spare seats in an aeroplane cannot be transferred to the next flight. Similarly, empty rooms in five-star hotels and credits not utilized are examples of services leading to
economic losses. As services are activities performed for simultaneous consumption, they perish unless consumed.
5. Changing demand: The demand for services has wide fluctuations and may be seasonal. Demand for tourism is seasonal, other services such as demand for public transport, cricket field and golf courses have fluctuations in demand. 6. Pricing of services: Quality of services cannot be standardized. The pricing of services are usually determined on the basis of demand and competition. For example, room rents in tourist spots fluctuate as per demand and season and many of the service providers give off-season discounts. 7. Direct channel: Usually, services are directly provided to the customer. The customer goes directly to the service provider to get services such as bank, hotel, doctor, and so on. A wider market is reached through franchising such as McDonald’s and Monginis. 8. Lack of Ownership : Lack of ownership may be one of the most obvious ones of the characteristics of service. It refers to the fact that you cannot own and store a service like you can a product. This characteristic is strongly linked to several other characteristics of services, such as intangibility, perishability, inseparability. 9. User participation : Finally, the characteristics of services include user participation. Indeed, users participate in every service production. Even when the user is not required to be at a location where the service is performed, users participate in every service production. A service cannot be separated from its provider, but neither can it be separated from its user.
Types of Services
Wherever people or products are involved directly, the
service classification can be done based on tangibility.
a) Services for people – Like Health care, restaurants
and saloons, where the service is delivered by people to
people.
b) Services for goods – Like transportation, repair and
maintenance and others. Where services are given by
people for objects or goods.
2) Classification of services based on intangibility
There are objects in this world which cannot be tangibly
quantified. For example – the number of algorithms it
takes to execute your banking order correctly, or the
value of your life which is forecasted by insurance
agents. These services are classified on the basis of
intangibility.
a) Services directed at people’s mind – Services sold
through influencing the creativity of humans are
classified on the basis of intangibility.
b) Services directed at intangible assets – Banking,
legal services, and insurance services are some of the
services most difficult to price and quantify.
Challenges faced by the Service Industry
It is a challenging task to manage a service or product industry. These challenges however are different and unique for each industry. Some of the challenges that are faced while managing,
- Most of the product companies have dedicated sales staff while in the service industry the service deliverers often do the selling. Coordinating marketing, operations and human resource efforts is a tedious task.
- Passion works for the service industry. More the passion, spirit and desire among the service staff more is the revenue generation and success generated every day. There is a direct correlation between staff passion and financial success and similarly lack of passion leads to failure in the service industry. Staffs need to be constantly motivated and efforts have to make to sustain employee commitment.
- While testing new services is a constant challenge communicating about these services simultaneously is also not easy.
- Setting prices does not come easily for service industry.
- Standardization versus personalization is another major issue the service industry has to face.
BASIS FOR COMPARISON
GOODS SERVICES
Meaning Goods are the material items that can be seen, touched or felt and are ready for sale to the customers.
Services are amenities, facilities, b or help provided by other people.
Nature Tangible Intangible Transfer of ownership Yes No
Evaluation Very simple and easy Complicated Return Goods can be returned. Services cannot be returned bac they are provided.
Separable Yes, goods can be separated from the seller. No, services cannot be separate the service provider. Variability Identical Diversified Storage Goods can be stored for use in future or multiple use.
Services cannot be stored. Production and Consumption
There is a time lag between production and consumption of goods.
Production and Consumption of occurs simultaneously.
CHAPTER 2
Marketing Framework
The service marketing mix is also known as an extended
marketing mix and is an integral part of a service
blueprint design. The service marketing mix consists of
7 P’s as compared to the 4 P’s of a product marketing
mix. Simply said, the service marketing mix assumes
the service as a product itself. However it adds 3 more
P’s which are required for optimum service delivery.
The product marketing mix consists of the 4 P’s which
are product, pricing, promotions and Placement. These
are discussed in my article on product marketing mix –
the 4 P’s.
The extended service marketing mix places 3 further P’s
which include people, Process and physical evidence.
All of these factors are necessary for optimum service
delivery. Let us discuss the same in further detail.
rural area. Read more about the role of business
locations or Place element.
3) Promotion
Promotions have become a critical factor in the service
marketing mix. Services are easy to be duplicated and
hence it is generally the brand which sets a service apart
from its counterpart. You will find a lot of banks and
telecom companies promoting themselves rigorously.
Why is that? It is because competition in this service
sector is generally high and a promotion is necessary to
survive. Thus banks, IT companies, and dotcoms place
themselves above the rest by advertising or promotions.
4) Pricing
Pricing in case of services is rather more difficult than in
case of products. If you were a restaurant owner, you
can price people only for the food you are serving. But
then who will pay for the nice ambiance you have built
up for your customers? Who will pay for the band you
have for music?
Thus these elements have to be taken into consideration
while costing. Generally service pricing involves taking
into consideration labor, material cost and overhead
costs. By adding a profit mark up you get your final
service pricing. You can also read about pricing
strategies. Here on we start towards the extended service
marketing mix.
5) People
People is one of the elements of service marketing mix.
People define a service. If you have an IT company,
your software engineers define you. If you have a
restaurant, your chef and service staff defines you. If
you are into banking, employees in your branch and
their behavior towards customers defines you. In case of
service marketing, people can make or break an
organization.
Thus many companies nowadays are involved into
specially getting their staff trained in interpersonal skills
and customer service with a focus towards customer
satisfaction. In fact many companies have to undergo
accreditation to show that their staff is better than the
rest. Definitely a USP in case of services.
6) Process
Service process is the way in which a service is
delivered to the end customer. Lets take the example of
two very good companies – McDonalds and FedEx.
Both the companies thrive on their quick service and the
reason they can do that is their confidence on their
processes.
On top of it, the demand of these services is such that
they have to deliver optimally without a loss in quality.
Thus the process of a service company in delivering its
product is of utmost importance. It is also a critical
component in the service blueprint, wherein before
establishing the service, the company defines exactly
what should be the process of the service product
reaching the end customer.
7) Physical Evidence
The last element in the service marketing mix is a very
important element. As said before, services
are intangible in nature. However, to create a better
Create a fully realized composite of your target market. This requires developing a marketing persona and a social media persona so that you can tailor your marketing to meet the needs of your audience. Traditionally here are the three main attributes to define your audience.
- Demographic traits. These attributes include geographic location, age, financial resources, and so on. Be aware that only relying on this data may cause you to overlook other factors that cause individuals to make purchase tradeoffs.
- Psychographic characteristics. These focus on customers’ interests and help marketers understand where their audience will make purchase tradeoffs.
- Behavioral actions. These factors examine the past and can overlook recent changes in customer behavior.
3. Create the offer.
Describe the specifics of your product and/or service. This goes beyond the basic offering and encompasses related information, branding and pricing that sets your offering apart from competitors and near substitutes. Use the following questions organized around the traditional four P’s of marketing to help develop your offering. Product:
- What’s the product or service? How does it differ from competitors and new substitutes?
- What does the customer get in addition to the item, sometimes referred to as an augmented product? Are there extras, such as guarantees, ongoing support, and community? Place:
- Where does the prospect engage with your firm, content and/or promotions?
- Where is the offer made, and at what point in purchase decision process?
- Where can the consumer buy your product/service? Do you provide more than one option?
- What channels do you use to continue to provide additional content and communications? Promotion:
- Are there any special offers, incentives, time limits, or quantity limits?
- Where is the customer in purchase process? Where is the customer physically?
- How is the information delivered to the customer? Pricing:
- How is the product or service priced? Is pricing consistent across channels? If not, is there a good reason? At least in the U.S., you don’t want to be accused of discriminatory pricing.
- How do you sell additional products or services?
4. Develop your creative.
Broadly defined, creative relates to how your product/ service is presented to prospects, customers and the public. It encompasses five distinct components.
- Branding How your organization’s branding is incorporated into your content, advertising, social media or other promotional piece? How is your brand positioned in the market place? Product benefits. How does your offering meet your prospects’ needs?
- Social media. These venues are useful for extending your reach. It can also provide an endorsement for your product or company.
6. Test your marketing.
Continually test various aspects of your marketing to maximize your results. Think holistically across the entire marketing process in terms of the four moments of truth. You need to keep optimizing your process to improve the bottom line. Further, run tests more than once to ensure results aren’t flukes and understand that factors may change over time. For example, promotions wear out over time. Start by testing on the areas that have the largest impact on your sales process.
- Target market. Are there other customers who are interested in your product/service?
- Offer. Can you change the pricing of your product or its presentation?
- Creative. Is your content, advertising or communications connecting with your target audience? Check the text, images, call-to-action and other elements.
- Media. Are you using the appropriate channel to communicate with your prospect? Are you employing a content format that’s easy-to-consume?
- Devices. Are your marketing communications available on the type of devices your audience prefers? Think computer, smartphone, tablet and/or offline.
7. Determine your success metrics
You must assess your results to determine your marketing’s effectiveness in achieving your intended goals. To this end, it’s helpful if your goals are specific and measurable.
CLASSIFICATION OF SERVICES
