1ChapterWhat are services?Why services marketing?Characteristics of Services Compared to GoodsThe Services Marketing TriangleServices Marketing Mix

What are services?All economic activities whose output is not a physical product, is generally consumed at the time it is produced and provides added value in forms (such as convenience, amusement, timeliness, comfort or health) that are essentially intangible concerns of its first purchaser

OR Activity or benefit that one party can offer to 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.

Examples of Service IndustriesHealth Carehospital, medical practice, dentistry, eye careProfessional Servicesaccounting, legal, architecturalFinancial Servicesbanking, investment advising, insuranceHospitalityrestaurant, hotel/motel, bed & breakfast ski resort, raftingTravelairline, travel agency, theme parkOthershair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design

Why Services Marketing?Services based economiesUnited States 80%India 48%Traditional marketing course has more focus on manufacturing and packaged goods (like P&G, Unilever, General Foods)There is a need for Marketing concepts specifically for ServicesService initiatives and promoting service quality leads to competitive advantage and so to profitsCustomer satisfaction index for services is declining

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Goods versus ServicesSource: A. Parasuraman, V.A. Zeithaml, and L. L. Berry, A Conceptual Model of Service Quality and Its Implications for Future Research, Journal of Marketing 49 (Fall 1985), pp. 4150.

Characteristics of Services

Implications of IntangibilityServices cannot be inventoried

Services cannot be easily patented

Services cannot be readily displayed or communicated

Pricing is difficult

Implications of HeterogeneityService delivery and customer satisfaction depend on employee and customer actions

Service quality depends on many uncontrollable factors

There is no sure knowledge that the service delivered matches what was planned and promoted

Implications of Simultaneous Production and ConsumptionCustomers participate in and affect the transaction

Customers affect each other

Employees affect the service outcome

Decentralization may be essential

Mass production is difficult

Implications of PerishabilityIt is difficult to synchronize supply and demand with services

Services cannot be returned or resold

The Services Marketing TrianglePROVIDERSCUSTOMERSCOMPANYExternal Marketingsetting the promiseInternal Marketingenabling the promiseInteractive Marketingdelivering the promise"

THE SERVICES MARKETING TRIANGLEThere are three types of marketing: External marketingInternal marketingInteractive marketingAll these revolve around making and keeping promises to customers.For services, all three types of marketing activities are essential for building and maintaining relationships with customers.

External MarketingA company makes promises to its customers regarding what they can expect and how it will be delivered.Traditional marketing activities: advertising, sales, special promotions etc.For services, some other factors like the service employees, the design and dcor of the facility, the service process etc. also helps to set customer expectations.Tendency to overpromise also leads to shaky beginning of the customer relationship

Interactive Marketing: Keeping PromisesPromises made must be keptThe most critical from customer point of viewAlso delivered through technologyInteractive marketing occurs in the moment of truth when the customer interacts with the organisation and the service is produced and consumed.Reliability of services is tested every time the customer interacts with the organisation.

Internal Marketing: Enabling PromisesIn order to deliver the promises made, the providers or service systems must have the skills, abilities, tools, and motivation to deliver.It also indicates that employee satisfaction and customer satisfaction are closely interlinked.

THE SERVICES MARKETING TRIANGLEAll three sides are essential to complete the whole and are critical for the success.

Without one of the sides in place, the triangle, or the total marketing efforts, cannot be optimally supported.

THE SERVICES MARKETING MIXAnother way to begin addressing the challenges of services marketing is to think creatively about marketing mix extended marketing mix for services.

One of the most basic concepts in marketing is marketing mix.

Marketing Mix: The elements an organization controls that can be used to satisfy or communicate with customers.

Traditional Marketing MixAll elements within the control of the firm that communicate the firms capabilities and image to customers or that influence customer satisfaction with the firms product and services: Product Price Place Promotion

Expanded Mix for Services --The 7 PsProductPricePlacePromotionPeopleAll human actors who play a part in service delivery and thus influence the buyers perceptions: namely, the firms personnel, the customer, and other customers in the service environment.Physical EvidenceThe environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service.ProcessThe actual procedures, mechanisms, and flow of activities by which the service is deliveredthe service delivery and operating systems.

Table 1.3Expanded Marketing Mix for Services