SERVICES CONCEPT

In simple words, services are deeds, processes, and performances. But, the increasinginterest in the services sector has been accompanied by considerable disagreement anddebate as to what constitutes a service and whether service marketing is a distinctivesubject area. In order to develop clarity on service as a concept,it is desirable to look at the way various researchers and scholars have defined it over the years. 1One of the first to define services was theAmerican Marketing Association which as early as in 1960 defined services as“activities, benefits, or satisfactions which are offered for sale, or provided in connection with the sale of goods”. This definition took a very limited view of services as it proposed that services are offered only in connection with the sale of goods.We may conclude service as, “an activity or series of activities rather than things which has some element of intangibility associated with it, which involves some interaction between the customer and the service provider, and does not result in a transfer of ownership. Customer has a vital role to play in the production process asthe services are provided in response to the problems of customers as solution. The production of the service may or may not be closely associated with a physical product”

CHARACTERISTICS

i) Intangibility:The most basic and universally cited 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 we can sense tangible goods. Forexample, when we buy a cake of

soap, we can see, feel, smell and use to check its effectiveness in cleaning. But, when we pay fees for a semester in the university, we are paying for the benefits of deriving knowledge, skills and education which is delivered to us by teachers. Teaching is an intangible service.When we travel by a plane, the benefit which we are deriving is a service (transportation) but, it has some tangible aspects such asthe particular plane in which we fly (Boeing, Avro, Concorde, etc.) and the food and drink which are served.

(ii) Inseparability:In most cases a service cannot be separated from the person or firm providing it. A service is provided by a person who possesses a particular skill (singer, doctor, etc.), by using equipment to handle a tangible product (dry cleaning) or by allowing access to or use of a physical infrastructure (hotel, train, etc.). Services are typically produced and consumed at the same time. The relationship between production and consumption, therefore, dictates that production and marketing are highly integrated processes. The telephone company produces telephone service while the telephone user consumes it. A plumber has to be physically present to provide the service, the beauti cian has to be available to perform the massage. The service providerand the client are often physically present when consumption takes place.

(iv) Perishability:Perishability refers to the fact that services cannot be saved, stored, resold, or returned. Since services are deeds, performances or acts whose production and consumption takes place simultaneously, they tend to perish in the absence of consumption. Goods can be stored and sold at a later date in the absence of a customer. Services, on the other hand, go waste if they are not consumed. A

seat on an airplane or in a restaurant, an hour of a professor’s time, or telephone line capacity not used cannot be reclaimed and used or resold at a later time.

(iv) Perishability:Perishability refers to the fact that services cannot be saved, stored, resold, or returned. Since services are deeds, performances or acts whose production and consumption takes place simultaneously, they tend to perish in the absence of consumption. Goods can be stored and sold at a later date in the absence of a customer. Services, on the other hand, go waste if they are not consumed. A seat on an airplane or in a restaurant, an hour of a professor’s time, or telephone line capacity not used cannot be reclaimed and used or resold at a later time. . (v) No Transfer of Ownership:When we buy a product, we become its owner-be it a pen, book, shirt, TV or Car. In the case of a service, we may pay for its use, but we never own it. By buying a ticket one can see the evening film show in local cinema theatre; by paying wages one can hire the services of a chauffeur who will drive his car; by paying the required charges we can have a marketing research firm survey into the reasons for our product’s poor sales performance, etc. In case ofa service, the payment is not for purchase, but only for the use or access to or for hire of items or facilities; and transfer of ownership does not take place.

(iii) Heterogeneity:Since services are performances, frequently produced by human beings, no two services will beprecisely alike. The human element is very much involved in providing and rendering services and this makes

standardization a very difficult task to achieve. The doctor who gives us complete attention in one visit may behave a little differently in next visit. The new bank clerk who encashes our cheques may not be as efficient as the previous one and we may have to spend more time for the same activity. This is despite the fact that rules and procedures have been laid down to reduce the role of the human element and ensure maximum efficiency. Airlines, banks, hotels, etc. have a large number of standardized procedures.

MARKETING OF GOOD S VS SERVICES

Products and services are two closely aligned but distinct concepts. Even though every company has a services component, statistics show that as many as 75% of start-up businesses provide services only. Understanding the differences and particular challenges can assist organisations to establish the right marketing approach for marketing in each case.

Lovelock and Wirtz (2007) point out that a product is tangible; a customer can touch and see the product before purchase and packaging and presentation play a role. Services, on the other hand, are not tangible and are more difficult to promote and sell.

Products satisfy a customer's need or want. A service sells a relationship and the value of the relationship between the buyer and seller of the service. The customer’s perception of the value can be influenced by educating customers on how to make a good choice, what to look for, document performances and guarantees.

Products tend to involve multiple line extensions or variations; services on the other hand, typically have a single option. It is often difficult to promote and sell the reputation of one single service over the benefits of many different products. Measuring the quality of a product is easier than measuring that of a service. The customer can return the product for

a refund or credit. A service is consumed as it is offered and lacks the return factor. This can be overcome by offering money-back guarantees.

The service experience is subjective. To overcome this, organisations should separate and standardise as many elements as possible. This will give customers the confidence that their consumption experience will meet their expectations. Services cannot be inventoried; they are perishable, which makes it difficult to match supply with demand. Perishability increases costs, and therefore the price of services.

Service products tend to be more rigidly regulated than goods as they are more risky for the consumer. Service marketers must be aware of regulations and work closely with legal experts, which can again translate into increased costs. Word-of-mouth is more influential in a service than a goods purchase. The wise marketer will establish a web presence and encourage consumer participation in peer-to-peer web interaction

Growth of service sectorThe service sector produces “intangible”goods, some well known—government,health, education—and some quitenew—modern communications, infor-mation, and business services. Producingservices tends to require relatively lessnatural capital and more human capi-talthan producing agricultural or indus-trial goods. As a result demand hasgrown for more educated workers,prompting countries to invest more ineducation—an overall benefit to theirpeople. Another benefit of the growing service sector is that by using fewer nat-ural resources than agriculture or indus-try, it puts less pressure on the local,regional, and global environment. Conserving natural capital and buildingup human capital may help global devel-opment become more

environmentallyand socially sustainable.Growth of the\service sector will not, however, be a mir-acle solution to the problem of sustain-ability, because agricultural and industrial growth are also necessary to meet theneeds of the growing world population.

Why has the service sector grown

Trends

According to the World Bank, the demand for services is on the rise with increases in income, as people are becoming less concerned about material needs. In the consumer sector, this leads to increasing demand for services such as health, education and entertainment. In business, companies recognize that many activities can be handled more efficiently by a service provider. Outsourcing services allows a business to concentrate on the activities that are critical to its success. These are called core activities, and they include sales and marketing, accounting, technology, quality, product and service delivery, management, human resources, finance and product development.

Change

Outsourcing services is also important if a business is undergoing change. According to the consultancy firm Accenture, rapidly changing market conditions put companies under pressure to reduce costs and adapt quickly. Outsourcing can go beyond cost savings -- it can improve cash flow and accelerate growth.

Strategic

Services can help a business improve efficiency and achieve its strategic business objectives. For example, consultancy services can help a company focus on critical areas for growth. Training services, for

example, help companies develop their workforce skills as a competitive advantage.

Project

Another factor in the growth of the service sector is the continuing complexity of business, according to the Bureau of Labor Statistics. Firms that offer advisory services are helping small businesses to deal with legislative changes, emerging technologies and marketing challenges by giving them access to skills and knowledge that they do not have in-house.

Marketing

The service sector is benefiting from improved marketing as service firms communicate their message more efficiently. Building understanding of the benefits of professional services is critical to the growth of the sector. According to the Rain Group, service firms can improve their performance by positioning themselves effectively and explaining their service benefits to customers.

SERVICE MARKETING MIX

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.

Product – The product in service marketing mix is intangible in nature. Like physical products such as a soap or a detergent, service products cannot be measured. Tourism industry or the education industry can be an excellent example. At the same time service products are

heterogenous, perishable and cannot be owned. The service product thus has to be designed with care. Generally service blue printing is done to define the service product. For example – a restaurant blue print will be prepared before establishing a restaurant business. This service blue print defines exactly how the product (in this case the restaurant) is going to be.

Place - Place in case of services determine where is the service product going to be located. The best place to open up a petrol pump is on the highway or in the city. A place where there is minimum traffic is a wrong location to start a petrol pump. Similarly a software company will be better placed in a business hub with a lot of companies nearby rather than being placed in a town or rural area.

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 promotions is necessary to survive. Thus banks, IT companies, and dotcoms place themselves above the rest by advertising or promotions.

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 ambience 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.

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.

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.

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 customer experience tangible elements are also delivered with the service. Take an example of a restaurant which has only chairs and tables and good food, or a restaurant which has ambient lighting, nice music along with good seating arrangement and this also serves good food. Which one will you prefer? The one with the nice ambience. That’s physical evidence. Several times, physical evidence is used as a differentiator in service marketing. Imagine a private hospital and a government hospital. A private hospital will have plush offices and well dressed staff. Same cannot be said for a government hospital. Thus physical evidence acts as a differentiator.

This is the service marketing mix (7p) which is also known as the extended marketing mix.