UNIT -1

INTRODUCTION TO SERVICES MANAGEMENT AND MARKETING

Meaning of service: The action of helping or doing work for someone.
Perform routine maintenance or repair work on (a vehicle or machine). "Ensure that gas
appliances are serviced regularly"

A service is a transaction in which no physical goods are exchanged. The benefits

of such a service are held to be demonstrated by the buyer's willingness to make
the exchange. Public services are those that society (nation state, fiscal union, and
region) as a whole pays for. Using resources, skill, ingenuity, and experience,
service providers benefit service consumers.
Definition and characteristics of Services
The American Marketing Association defines services as - Activities, benefits and
satisfactions which are offered for sale or are provided in connection with the sale
of goods.
The defining characteristics of a service are:
Intangibility: Services are intangible and do not have a physical existence. Hence
services cannot be touched, held, tasted or smelt. This is most defining feature of a
service and that which primarily differentiates it from a product. Also, it poses a
unique challenge to those engaged in marketing a service as they need to attach
tangible attributes to an otherwise intangible offering.
Heterogeneity/Variability: Given the very nature of services, each service
offering is unique and cannot be exactly repeated even by the same service
provider. While products can be mass produced and be homogenous the same is
not true of services. e.g.: All burgers of a particular flavor at McDonalds are almost
identical. However, the same is not true of the service rendered by the same
counter staff consecutively to two customers.
Perishability: Services cannot be stored, saved, returned or resold once they have
been used. Once rendered to a customer the service is completely consumed and
cannot be delivered to another customer. eg: A customer dissatisfied with the
services of a barber cannot return the service of the haircut that was rendered to
him. At the most he may decide not to visit that particular barber in the future.
Inseparability/Simultaneity of production and consumption: This refers to the
fact that services are generated and consumed within the same time frame. Eg: a
haircut is delivered to and consumed by a customer simultaneously unlike, say, a
takeaway burger which the customer may consume even after a few hours of
purchase. Moreover, it is very difficult to separate a service from the service
provider. Eg: the barber is necessarily a part of the service of a haircut that he is
delivering to his customer.
Types of Services
Core Services: A service that is the primary purpose of the transaction. Eg: a
haircut or the services of lawyer or teacher.
Supplementary Services: Services that are rendered as a corollary to the sale of a
tangible product. Eg: Home delivery options offered by restaurants above a
minimum bill value.
Difference between Goods and Services
Given below are the fundamental differences between physical goods and services:

Goods Services

A physical commodity A process or activity

Tangible Intangible

Homogenous Heterogeneous

Production and distribution are Production, distribution and

separation from their consumption consumption are simultaneous processes

Can be stored Cannot be stored

Transfer of ownership is possible Transfer of ownership is not possible

The 7 Ps of Services Marketing

The first four elements in the services marketing mix are the same as those in the
traditional marketing mix. However, given the unique nature of services, the
implications of these are slightly different in case of services.
Product: In case of services, the product is intangible, heterogeneous and
perishable. Moreover, its production and consumption are inseparable. Hence,
there is scope for customizing the offering as per customer requirements and the
actual customer encounter therefore assumes particular significance. However, too
much customization would compromise the standard delivery of the service and
adversely affect its quality. Hence particular care has to be taken in designing the
service offering.
Pricing: Pricing of services is tougher than pricing of goods. While the latter can
be priced easily by taking into account the raw material costs, in case of services
attendant costs - such as labor and overhead costs - also need to be factored in.
Thus a restaurant not only has to charge for the cost of the food served but also has
to calculate a price for the ambience provided. The final price for the service is
then arrived at by including a markup for an adequate profit margin.
Place: Since service delivery is concurrent with its production and cannot be
stored or transported, the location of the service product assumes importance.
Service providers have to give special thought to where the service would be
provided. Thus, a fine dine restaurant is better located in a busy, upscale market as
against on the outskirts of a city. Similarly, a holiday resort is better situated in the
countryside away from the rush and noise of a city.
Promotion: Since a service offering can be easily replicated promotion becomes
crucial in differentiating a service offering in the mind of the consumer. Thus,
service providers offering identical services such as airlines or banks and insurance
companies invest heavily in advertising their services. This is crucial in attracting
customers in a segment where the services providers have nearly identical
offerings.
We now look at the 3 new elements of the services marketing mix - people,
process and physical evidence - which are unique to the marketing of services.
People: People are a defining factor in a service delivery process, since a service is
inseparable from the person providing it. Thus, a restaurant is known as much for
its food as for the service provided by its staff. The same is true of banks and
department stores. Consequently, customer service training for staff has become a
top priority for many organizations today.
Process: The process of service delivery is crucial since it ensures that the same
standard of service is repeatedly delivered to the customers. Therefore, most
companies have a service blue print which provides the details of the service
delivery process, often going down to even defining the service script and the
greeting phrases to be used by the service staff.
Physical Evidence: Since services are intangible in nature most service providers
strive to incorporate certain tangible elements into their offering to enhance
customer experience. Thus, there are hair salons that have well designed waiting
areas often with magazines and plush sofas for patrons to read and relax while they
await their turn. Similarly, restaurants invest heavily in their interior design and
decorations to offer a tangible and unique experience to their guests.
Meaning of Services Marketing:
Intangible products such as accounting, banking, cleaning, consultancy, education,
insurance, expertise, medical treatment, or transportation.
Sometimes services are difficult to identify because they are closely associated
with a good; such as the combination of a diagnosis with the administration of a
medicine. No transfer of possession or ownership takes place when services are
sold, and they (1) cannot be stored or transported, (2) are instantly perishable, and
(3) come into existence at the time they are bought and consumed.

Stated simply, Services Marketing refers to the marketing of services as against

tangible products.
As already discussed, services are inherently intangible, are consumed
simultaneously at the time of their production, cannot be stored, saved or resold
once they have been used and service offerings are unique and cannot be exactly
repeated even by the same service provider.
Growth of Service Sector:
Marketing of services is a relatively new phenomenon in the domain of marketing,
having gained in importance as a discipline only towards the end of the 20th
century.
Services marketing first came to the fore in the 1980s when the debate started on
whether marketing of services was significantly different from that of products so
as to be classified as a separate discipline. Prior to this, services were considered
just an aid to the production and marketing of goods and hence were not deemed as
having separate relevance of their own.
The 1980s however saw a shift in this thinking. As the service sector started to
grow in importance and emerged as a significant employer and contributor to the
GDP, academics and marketing practitioners began to look at the marketing of
services in a new light. Empirical research was conducted which brought to light
the specific distinguishing characteristics of services.
By the mid 1990s, Services Marketing was firmly entrenched as a significant sub
discipline of marketing with its own empirical research and data and growing
significance in the increasingly service sector dominated economies of the new
millennium. New areas of study opened up in the field and were the subject of
extensive empirical research giving rise to concepts such as - the product-service
spectrum, relationship marketing, franchising of services, customer retention etc.

Importance of Marketing of Services

Given the intangibility of services, marketing them becomes a particularly
challenging and yet extremely important task.
A key differentiator: Due to the increasing homogeneity in product offerings, the
attendant services provided are emerging as a key differentiator in the mind of the
consumers. Eg: In case of two fast food chains serving a similar product (Pizza Hut
and Dominos), more than the product it is the service quality that distinguishes the
two brands from each other. Hence, marketers can leverage on the service offering
to differentiate themselves from the competition and attract consumers.
Importance of relationships: Relationships are a key factor when it comes to the
marketing of services. Since the product is intangible, a large part of the customers
buying decision will depend on the degree to which he trusts the seller. Hence, the
need to listen to the needs of the customer and fulfill them through the appropriate
service offering and build a long lasting relationship which would lead to repeat
sales and positive word of mouth.
Customer Retention: Given todays highly competitive scenario where multiple
providers are vying for a limited pool of customers, retaining customers is even
more important than attracting new ones. Since services are usually generated and
consumed at the same time, they actually involve the customer in service delivery
process by taking into consideration his requirements and feedback. Thus they
offer greater scope for customization according to customer requirements thus
offering increased satisfaction leading to higher customer retention.
Service Delivery process
The four key elements for successful service delivery system are service culture,
service quality, employee engagement and customer experience.
Delivering excellent service
Running a successful service company should be synonymous with delivering
excelling service. If not, then why consider running a service business at all? Yet, if
all companies which perform services effectively compete on providing the
service, then the key differentiator lies in the service management model and the
ability to execute it. Designing the service delivery system should focus on what
creates value to the core organizations and how to engage frontline employees to
deliver the ultimate customer experience.
The four key elements in such a system are:
Service Culture : It is built on elements of leadership principles, norms, work
habits and vision, mission and values. Culture is the set of overriding principles
according to which management controls, maintains and develops the social
process that manifests itself as delivery of service and gives value to customers.
Once a superior service delivery system and a realistic service concept have been
established, there is no other component as fundamental to the long-term success
of a service organization as its culture.

(The content of each element will naturally vary from company to company and is
in essence the service strategy of the company. But all elements must be
considered and in place.)
Employee Engagement includes employee attitude activities, purpose driven
leadership and HR processes. Even the best designed processes and systems will
only be effective if carried out by people with higher engagement. Engagement is
the moderator between the design and the execution of the service excellence
model.
Service Quality includes strategies, processes and performance management
systems. The strategy and process design is fundamental to the design of the
overall service management model. Helping the client fulfil their mission and
supporting them in the pursuit of their organizational purpose, must be the
foundation of any service provider partnership.
Customer Experience includes elements of customer intelligence, account
management and continuous improvements. Perception is king and constantly
evaluating how both customer and end-user perceive service delivery is important
for continuous collaboration. Successful service delivery works on the basis that
the customer is a part of the creation and delivery of the service and then designs
processes built on that philosophy this is called co-creation.
How to use the model: The order that these four points are listed in is not random
and there is a logical sequence in first defining the service culture, then employee
engagement, which will then foster a high level of service quality, which will then
develop the right customer experience a virtuous circle.
ROLE OF CUSTOMER IN SERVICE DELIVERY PROCESS:
Service delivery for customers can be seen in a factory. The place the service is
produced and is consumed interacting with the employees and other customers.
E.g. in a classroom or in a training situation, students (customers) are sitting in the
factory interacting with the instructor and other students as they consume the
educational services.
Since these customers are present during the service production, customers can
contribute to or detract from the successful delivery of the service and to their own
satisfaction.
Participation in service delivery
The level of participation low, medium, high varies across different services. In
some cases, all that is required is the customers physical presence (low level of
participation), with the employees of the firm doing all of the service production
work, as in case of a Ghazal/ musical concert. The listeners must be present to
receive the entertainment service. In other cases, consumer inputs are required to
aid the service organization in creating the service delivery (moderate level of
participation).
Inputs can include information, effort or physical possessions. All three of
these are required in case of accounting services who prepares a clients income tax
return effectively. Information in the form of tax history, marital status, and
number of dependents. Effort in putting the information together in a useful
fashion. Physical Possessions such as receipts and past tax returns. In case of long
term consulting engagements involvement of the customers high as they co create
the service.
Customers roles:
Customers as a productive process
Service customers are referred to as partial employees of the organization. They
are human resources who contribute to the organizations productive capacity. In
other words, if customers contribute effort, time or other resources to the service
production process, they should be considered as part of the organization.
Customer inputs can affect the organizations productivity through both quality and
quantity of output.

E.g. research suggest that in an IT consulting context:

Clients who clearly articulate the solution they desire.
Provide needed information in a timely manner.
Communicate openly.
Gain the commitment of key internal stakeholders.
And raise the issues during the process before it is too late will get better service.

Customers as quality contributors to service delivery and satisfaction:

Another role customers play in service delivery is that of the contributor to their
own satisfaction and the ultimate quality of the services they receive. Customers
may care little that they have increased the productivity of the organization through
their participation. But they likely care a great deal about whether their needs are
fulfilled. Effective customer participation can increase the likelihood of service
delivery that their needs are met and that benefits the customer seeks are attained.
Services such as health care, education, personal fitness, and weight loss, where
the service outcome is highly dependent on the customers participation. In such
services unless the customers perform their roles effectively, the desired service
outcomes cannot be achieved.
Research has shown that in education, active participation by students as opposed
to passive listening increases learning the desired service output significantly.
Customers as competitors
A final role played by service customers is that of a potential competitor. If self-
service customers can be viewed as resources of the firm, or as partial
employees, self-service customers in some cases. They can partially perform the
service or the entire service for themselves and may not need the provider at all.
Customers thus in that sense are competitors of the companies that supply the
service. Whether to produce a service for themselves (internal exchange). E.g.
child care, home maintenance i.e. have someone else provide home services for
them (external exchange) is a common dilemma for consumers.
Similar internal versus external exchange decisions are made by organizations.
Firms frequently choose to outsource service activities such as payroll, data
processing, research, accounting, maintenance, and facilities management. They
find that it is advantageous to focus on their core businesses and leave these
essential support services to others with greater expertise. Alternatively, a firm may
decide to stop purchasing services externally and bring the service production
process in-house.
Quality issues in services:
Quality needs to be understood and managed throughout a service organization.
Four areas in particular may serve as an arena within which the question of quality
can be addressed (Figure 15.1)

Service encounter the customer interacts with animate (the service employees)
and inanimate objects (the physical evidence, e.g., an information sign).
How knowledgeable and courteous is the service employee?
How effective is the sign in terms of visibility, information provided,
positioning?
How can the customer contribute to the quality of the encounter?
What contribution do script theory and role theory make?
Service design the customer goes through a process to obtain a service.
How well designed is the process?
Is there a blueprint/flowchart of the process?
To what extent is there flexibility in the system?
Does the process require customization of standardization?
Service productivity there is a relationship between the quantity and quality of
goods or services produced and the quality of resources used to produce them.
What are the possible relationships between changes in quality and changes
in quantity? i.e., if quantity increases (number of patients seen by a general
practitioner) what effect could that have on the quality of service?
What role should the customer play in the productivity equation?
Service organization and culture the culture of an organization and the way
it is organized can affect the quality of service.
How do the various organization cultures (power, role, achievement and
support) act as a key to understanding the kind of service produced?
What characteristics/features of an organization enable it to respond
positively to customer needs and deliver a quality service?
GAP MODEL
Customers compare the service they 'experience' with what they 'expect' and when
it does not match the expectation, a gap arises.

The GAP Model

The Service Quality Model, also known as the GAP Model, was developed in
1985. It highlights the main requirements for delivering a high level of service
quality by identifying five gaps' that can lead to unsuccessful delivery of service.
GAP 1: Gap between consumer expectation and management perception:
arises when the management or service provider does not correctly perceive
what the customers wants or needs.
GAP 2: Gap between management perception
and service quality specification: this is when the management or service
provider might correctly perceive what the customer wants, but may not set
a performance standard.
GAP 3: Gap between service quality specification and service delivery:
may arise pertaining to the service personnel. This could arise due to there
being poor training, incapability or unwillingness to meet the set service
standard.
GAP 4: Gap between service delivery and external communication:
consumer expectations are highly influenced by statements made by
company representatives and advertisements. The gap arises when these
assumed expectations are not fulfilled at the time of service delivery.
GAP 5: Gap between expected service and experienced service: this gap
arises when the consumer misinterprets the service quality.
Moment of Truth:
Every business knows that in order to thrive it needs to differentiate itself in the
mind of the consumer. Price has proved inadequate since there is a limit to how
much a firm can cut back on its margins. Product differentiation is also no longer
enough to attract or retain customers since technological advances have resulted in
products becoming almost identical with very few tangible differences from others
in the same category. Consequently, marketers have realized the importance of
service differentiation as a sustainable strategy for competing for a portion of the
customers wallet.

Service Encounter / Moment of Truth

A moment of truth is usually defined as an instance wherein the customer and the
organization come into contact with one another in a manner that gives the
customer an opportunity to either form or change an impression about the firm.
Such an interaction could occur through the product of the firm, its service offering
or both. Various instances could constitute a moment of truth - such as greeting the
customer, handling customer queries or complaints, promoting special offers or
giving discounts and the closing of the interaction.
Importance
In todays increasingly service driven markets and with the proliferation of
multiple providers for every type of product or service, moments of truth have
become an important fact of customer interaction that marketers need to keep in
mind. They are critical as they determine a customers perception of, and reaction
to, a brand. Moments of truth can make or break an organizations relationship
with its customers.
This is more so in the case of service providers since they are selling intangibles by
creating customer expectations. Services are often differentiated in the minds of the
customer by promises of what is to come. Managing these expectations constitutes
a critical component of creating favorable moments of truth which in turn are
critical for business success.
Moments of Magic and Moments of Misery
Moments of Magic: Favorable moments of truth have been termed as moments of
magic. These are instances where the customer has been served in a manner that
exceeds his expectations. Eg: An airline passenger being upgraded to from an
economy to a business class ticket or the 100th (or 1000th) customer of a new
department store being given a special discount on his purchase. Such gestures can
go a long way in creating a regular and loyal customer base. However, a moment
of magic need not necessarily involve such grand gestures. Even the efficient and
timely service consistently provided by the coffee shop assistant can create a
moment of magic for the customers.
Moment of Misery: These are instances where the customer interaction has a
negative outcome. A delayed flight, rude and inattentive shop assistants or poor
quality of food served at a restaurant all qualify as moments of misery for the
customers. Though lapses in service cannot be totally avoided, how such a lapse is
handled can go a long way in converting a moment of misery in to a moment of
magic and creating a lasting impact on the customer.

Managers do not control the quality of the product when the product is a
service
The quality of the service is in a precarious state --- it is in the hands of the
service workers who produce and deliver it. ---- Karl Albrecht.