Characteristics of Services:

1. Intangibility : Services are not physical objects, and cannot be touched or directly perceived by the

physical senses. While selling or promoting a service, one has to concentrate on the satisfaction and

benefit a customer can derive from the service.

2. Perishability : Services have a high degree of perishability. The element of time assumes a significant position. If a service is not successfully sold

today, the potential earnings from that are lost forever. It cannot be stored. Unutilised services are an economic waste. e.g. an unoccupied building, an unemployed

person, vacant seats in transport, etc.

3. Inseparability : Services are created and supplied simultaneously. There is no clear separation between

the creation and consumption of the service, and services and service providers are closely associated.

Donald Cowell states “Goods are produced, sold, and consumed, whereas services are sold, and then produced and consumed.”

4. Heterogeneity : The quality of services cannot be standardised. Consumers rate the services in different ways. This is due to the difference in

perception and expectations of inviduals at the level of providers and users.

5. Ownership : The very nature of services precludes transfer of ownership, as in the case of goods. Users only gain access to services. They cannot own the services.

e.g a customer can use a hotel room or swimming pool, however the ownership remains with the service providers.

6. Simultaneity : Services cannot move through channels of distribution and cannot be delivered to

potential customers. Either are brought to the services, or service providers go to the users.

Thus, the consumption and production of services happens at the same place simultaneously.

7. Quality Measurement : It is very complicated to accurately quantify the value of services, in monetary terms. Quality measurement of services is subjective, and may vary with various factors like

expectations and perception of consumers, brand value of service provider, etc. e.g. We can easily quantify the food served in a restaurant, but it's difficult to do the

same to measure the performance of the restaurant staff.

8. Nature of Demand : Demand for many services is generally fluctuating. e.g. During holiday season, the demand for transport and tourism services increases

drastically.

Service Triangle:

Service marketing involves 3 types of marketing:

1. EXTERNAL MARKETING2. INTERNAL MARKETING3. INTERACTIVE MARKETING

The three types of service marketing can be depicted and explained by a 'Service Triangle'.

1. External Marketing : “Setting the Promise” Marketing to END-USERS. Involves pricing strategy, promotional activities, and all communication with

customers. Performed to capture the attention of the market, and arouse interest in the service.

2. Internal Marketing : “Enabling the Promise” Marketing to EMPLOYEES. Involves training, motivational, and teamwork programs, and all communication with

employees. Performed to enable employees to perform the service effectively, and keep up the

promise made to the customer.

3. Interactive Marketing : (Moment of Truth, Service Encounter) This refers to the decisive moment of interaction between the front-office employees

and customers, i.e. delivery of service. This step is of utmost importance, because if the employee falters at this level, all prior

efforts made towards establishing a relationship with the customer, would be wasted. Moment of Truth :

The conceptual framework of 'Moments of Truth' was devised by Richard Norman. Subsequently, Scandinavian Airlines adopted it, and implemented it in their business strategy. Within 3 years, SAS was transformed from a loss-making company, to 'Best Airline of the Year'.

Interactive marketing takes place outside the marketing mix. It takes place at the very moment of interaction between the buyer and seller. These interactions are called SERVICE ENCOUNTERS.

In this process, the customer is able to directly judge the quality of service provided by the service provider. The customer evaluates the service on two aspects:

1. Technical Quality : This refers to the technical competence and quality offered by the service

provider, in the form of production facilities, skill, etc. in the delivery of service.

Since technical quality is easily quantifiable, customers tend to give more weightage to this aspect. But customers are not interested only in what is being delivered, but also in how it is delivered.

2. Functional Quality : This refers to the behavior of employees and how the production facilities are

used. It includes the attitude and performance of personnel. For example, the rude behavior of the receptionist can reverse the good impression formed by the high technical quality, and cause loss of customers.

The customer can make judgements on technical and functional quality, during decisive moments of interaction, called 'SERVICE ENCOUNTERS'. Service encounters may be classified into:

1. Remote Encounter : No human contact. The tangible evidence of the service becomes the basis for judging quality, as

there is no human contact in service delivery. e.g. ATM, vending machines, automated online services.

2. Phone Encounter : Indirect human contact. Here, the service quality can be judged on the basis of several factors like

promptness in answering the call, tone of voice, and efficiency in handling issues.

e.g. Telemarketing.

3. Face-to-Face Encounter : Direct human contact. In this situation, there is direct, face-to-face contact between the customer and

the employee. Determining service quality in such a situation is very complex, as it will be

influenced by the behaviour of the customer and employee in that moment.

Thus, interactive marketing is the decisive stage where value is created and delivered to the customer. At this stage, all efforts of internal and external marketing will be reflected.

1.

10 P’s of Service Marketing

1. Product:

A PRODUCT is anything that can be offered to the market, for attention, acquisition, and consumption, in order to satisfy a want or a need.

Product Levels :

2. Price:

The price of the service is primarily determined by 3 factors, viz.:1. Cost of Production2. Demand3. Competition

This is depicted by a PRICING TRIPOD.

3. 3.Place: PLACE includes the location of the service provider, channels of distribution and the

intermediaries involved.

6-Market Model :

1. Existing and prospective customers.2. Existing customers who refer to other prospects.3. Consumer groups, business press, media, govt.4. For attracting right employees.5. Suppliers of raw materials, their standards and quality.6. Internal departments and staff.

SERVICE CHANNEL OF DISTRIBUTION

Shares, Real Estate Service Brokers

Insurance, Travel, Shipping, Loan Service Agents

Telemarketing, E-Marketing, Mail-order Direct Marketing

Fast-food / Supermarket / Cyber-cafe chains Franchising

4. Promotion: Advertising. Sales promotion. Sampling of services. Using customers as customer-inductors. Offering discounts to existing customers. Developing customer-loyalty & rewards programs.

5. Physical Evidence:

6. Process:

Process depends on 6 factors:1. The service itself (i.e. if it is process-dependent).2. Level of customer-participation.3. Degree of customer contact.4. Degree of divergence (degree of standardization).5. Location of service.6. Complexity of service.

Process includes all of the value-creating activities involved in production and delivery of the service.

7. People:

The role of people is of utmost importance in a service organization.

Servuction Model : (Developed by Eric Langeard & Pierre Eiglier) People work in various sections in the organization, and not all employees need

to be in direct contact with clients.

HIGH CONTACT - Front Line - Front OfficeLOW CONTACT - - NO CONTACT - Backstage - Back Office

Customers receive benefits by interacting with visible elements of service system.

Visible elements include:1. All contact personnel employed by the service provider.2. Aspects of the inanimate environment.3. Other customers within the service system.

Example :

Role of People :In order to have a result-oriented approach, the service firm must:1. Hire the right person for the right job.2. Train people to deliver quality services.3. Delegate authority and responsibility.4. Promote teamwork.5. Provide a good support-system to employees.6. Retain the best employees and implement techniques to prevent attrition.

8. Positioning: Positioning is deduced & planned by analysing positioning strategies. Positioning Strategies : 1. Boston Consulting Group Matrix

Boston Consulting Group Matrix :

Cash Cow High market share.Low growth rate.

A business unit that has a large market share in a mature, slow growing industry.

Cash cows require little investment and generate cash that can be used to invest in other business units.

Star Low market share.Low growth rate.

A business unit that has a large market share in a fast growing industry.

Stars may generate cash, but because the market is growing rapidly they require investment to maintain their lead. If successful, a star will become a cash cow when its industry matures.

Question Mark Low market share.High growth rate.

A business unit that has a small market share in a high growth market.

These business units require resources to grow market share, but whether they will succeed and become stars is unknown.

Dog High market share.High growth rate.

A business unit that has a small market share in a mature industry.

A dog may not require substantial cash, but it ties up capital that could better be deployed elsewhere.

Unless a dog has some other strategic purpose, it should be liquidated if there is little prospect for it to gain market share.

As a particular industry matures and its growth slows, all business units become either cash cows or dogs. The natural cycle for most business units is that they start as question marks, then turn into stars. Eventually the market stops growing thus the business unit becomes a cash cow. At the end of the cycle the cash cow turns into a

dog.

9. Perception: Perception refers to the point of view of an entity in the service system. Perception is

largely responsible for setting standards, and creating & fulfilling expectations.

10. Planning: Clearly define the goal. Identify all the main issues to be addressed. Review past performance. Decide budgetary requirement. Focus on matters of strategic importance. What are the requirements and how will they be met? What will be the likely length of the plan and its structure? Identify shortcomings in the concept. Implement the plan. Review periodically.