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Services marketing is a sub field of marketing which covers the marketing of both goods and services. Goods marketing includes the marketing of fast moving consumer goods (FMCG) and durables. Services marketing typically refers to the marketing of both business to consumer (B2C) and business to business (B2B) services. Common examples of service marketing are found in telecommunications, air travel, health care, financial services, all types of hospitality services, car rental services, and professional services.
A service, according to Vargo and Lusch (2004), is ‘the application of specialized competences (knowledge and skills) through deeds, processes, and performances for the benefit of another entity or the entity itself. Services are economic activities, rather than tangible products, offered by one party to another. Rendering a service to recipients, objects, or other assets depends on a time-sensitive performance to bring about the desired result. In exchange for money, time, and effort, service customers expect value from access to goods, labor, professional skills, facilities, networks, and systems; but they do not normally take ownership of any of the physical elements involved.
Services marketing is a relatively new phenomenon in the domain of marketing. It gained importance as a discipline towards the end of the 20th century. Services marketing first came into force in the 1980s when there was debate of whether the marketing of services was significantly different from that of products, and whether it should be classified as a separate discipline. Prior to this, services were considered as an aid to the production and marketing of goods, and were not deemed as having separate relevance on their own.
The 1980s saw a shift in this thinking. As the service sector started to grow in importance in post-industrial societies and emerged as a significant employer and contributor to those nations' GDPs, academia 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, growing significance in the increasingly service sector dominated economies of the new millennium. New areas of study in the field opened up and were the subject of extensive empirical research. This gave rise to concepts such as the product-service spectrum, relationship marketing, franchising of services, customer retention, and others.
Due to the increasing homogeneity in product offerings, the attendant services provided are emerging as a key differentiator in the mind of the consumers. In case of two fast food chains serving a similar product, it is the service quality that distinguishes the two brands from each other, rather than the product. Marketers are able leverage their service offering to differentiate themselves from the competition and attract consumers.
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, to fulfill them through the appropriate service offering, and to build a long lasting relationship is important because it would lead to repeat sales and positive word of mouth.
Given a 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 involve the customer in service delivery process by taking into consideration his expectations and feedback. Thus, they offer a greater scope for customization according to customer requirements, which increase satisfaction, leading to higher customer retention.
When the physical product cannot easily be differentiated, the key to competitive success may lie in adding valued services and improving their quality. Rolls-Royce has ensured its aircraft engines are in high demand by continuously monitoring the health of its 3000 engines for 45 airlines through live satellite feeds. Under its "TotalCare" program, airlines pay Rolls a fee for every hour an engine in flight, and Rolls assumes the risks and costs of downtime and repairs in return.
The 7 P’s 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.
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 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 mark up for an adequate profit margin.
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.
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.
The final three elements of the services marketing mix - people, process and physical evidence - are unique to the marketing of services.
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.
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 blueprint 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.
Since services are intangible in nature, most service providers strive to incorporate certain tangible elements into their offering to enhance customer experience. Many hair salons invest in comfortable and stylish sitting areas with magazines and plush sofas for patrons to read and relax while they wait. Similarly, many restaurants invest heavily in their interior design and decorations to offer a tangible and unique experience to their guests.
The services sector comprises a wide array of industries that sell to individual consumers and business customers, as well as to government agencies and nonprofit organizations.
Services make up the bulk of the economy in post-industrial societies and account for most of the growth in new jobs. Unless a person is already predestined for a career in family manufacturing or agricultural business, the probability is high that they will spend their working life in service organizations.
The size of service sector is increasing in almost all economies around the world. As national economy develops, the relative share of employment among the agricultural industry, and the service industry change dramatically. Even in emerging economies, service output is growing rapidly and often repress
- Ordering Ease: Ordering ease refers to how easy it is for the customer to place an order with the company.
- Delivery Ease: Delivery refers to how well the product or service is brought to the customer. It includes speed, accuracy, and care throughout the process.
- Installation: It refers to the work done to make a product or service operational in its planned location. Ease of installation becomes a true selling point, especially when the target market is technology novice.
- Customer Training: It refers to training the customer's employees to use the vendor's equipment properly and efficiently.
- cribes the service program for helping customers keep purchased products in good working order.
There are 5 widely used fundamentals of Services Marketing.
- Intangibility: This is perhaps the most important of all the fundamentals. Intangibility describes the lack of physical evidence that the customer will receive, particularly in what are known as "pure services" (e.g., legal services). Therefore managers have to create tangibility through the Servicescape (Bitner, 1992)
- Heterogeneity: Also known as variability, this fundamental explains how each service encounter is different. This can be due to situational factors (e.g. weather) or personal factors (e.g. personality traits). That is, not only may different people react to the same situation in different ways, and not only may the same person react to different situations in different ways, but also the same person may react to the same situation in different ways, entirely for personal reasons unidentifiable by the service industry employee. Because of this, employees need to be able to cope with an array of responses. Customers are the only people who can judge their satisfaction, and due to this subjective nature it can be difficult to standardize a service.
- Simultaneous Production and Consumption: Refers to the inseparability in the service environment between the production and consumption of the service. Both employees and customers affect the service outcome, implying that the customer is a co-producer of the service. For the service company, this emphasizes the importance of both employees and customers, so internal and external marketing are vital, as well as interactive marketing between customers and employees. It is therefore important to manage customer-employee interactions and keep employees well trained.
- Perishability: The immediate and time-bound nature of services means that they cannot be reused, returned or resold, unlike product-based companies. Without careful planning and market research, perishability can lead to over-demand or alternatively unused capacity. To overcome this, part-time employees, just-in-time production and reservation systems can be used.
- Lack of Ownership: Services are experiential in nature, especially pure services. There is often nothing physical to take away from the service, relating back to intangibility. This can make it difficult for customers to compare brands, so it is important for managers to differentiate their service offering through physical evidence. For example, at a theme park, you might get a ride photo to take home. By creating enduring memories for customers, the company can try and build customer loyalty and help to overcome the lack of differentiation.
- Industrialization of services business model
- Servitization of products business model
- Service system
- Christopher Lovelock and Jochen Wirtz (2011), Services Marketing – People, Technology, Strategy. 7th ed., Upper Saddle River, New Jersey: Prentice Hall
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- Bowman, Peter (2012). "Service 7", Short Stop Press. www.service7.com.au