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Service Marketing
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Week 6: Service MarketingSOSTAC Reference
Services
The Service Sector… (background)
• Small locally operated businesses such as restaurants, laundries, taxis and cleaning services.
• Technology has resulted in an increasing number of services being offered online.
• Government and non-profit organisations are also in the business of service production.
• According to the World Bank in countries such as Argentina and Brazil the service sector
(though much of it informal) actually provides over 50% of the GDP and a large % of
employment, e.g. USA 78%, EU 70%, Brazil 60%, Thailand almost 40% (WTO 2016).
• The service sector dominates the GDP of advanced economies such as USA and UK, where
70-75% of the national income is produced by services.
• In the developing economies also, services play an important role and expand as the country
develops.
What is a Service?
Due to their diversity, services have been difficult to define.
Zeithaml and Bitner (1996) define services as “deeds, processes and performances”
(Source: Zeithaml, V.A. and Bitner, M.J ‘Services Marketing’)
Lovelock and Wright (1999) suggest “A service is an act or performance offered by one party to
another”
(Source: Lovelock, c. and Wright, L ‘Principles of service marketing and management’)
The Four Unique Characteristics of Service
There are four readily accepted distinguishing characteristics for services that create strategic
challenges.
,Intangibility
Services are seen as being intangible in the sense that customers cannot hold them, touch them, and
try one out before buying / purchasing. A key strategic issue is that even the most intangible services
(pure services like consulting projects or executive seminars) have certain tangible aspects (i.e.
features / traits / characteristics) to them that can be used to convey perceptions of service quality.
Consulting personnel can dress in a smart manner to convey professionalism, the consulting offices
where meetings with the client take place can be managed to convey / communicate / express
success and professionalism through various atmospheric components (e.g. furniture, floors, walls,
lighting etc.), and the various promotional materials, communications, and the project reports can
be presented in such a way as to exude / convey quality. Even the most intangible service can be
made more tangible in creative strategic ways.
(Source: Douglas West, John Ford, Essam Ibrahim ‘Strategic Marketing: Creating Competitive
Advantage’)
Heterogeneity / Variability
This focuses on the fact that each time the service is provided there will be differences due to
environmental variation or changes in attitude, mood, or emotion on the part of either the provider
(e.g. business) or the recipient (e.g. business (B2B) or consumer (B2C)). It is therefore important for
the services marketer (given the heterogeneity of service interactions) to ensure as much
consistency as possible. While total consistency is impossible, there are mechanisms / methods that
can be utilized / used to reduce inconsistencies. One involves the deign of the service in such a way
as to make it as uniform / unvarying / consistent / homogeneous as possible. This might be
accomplished via automation where possible or by training service personnel to follow strictly
controlled guidelines. Hand in hand (i.e. together) with this approach would go the need for an
effective employee selection, motivation, and retention process. No matter how sophisticated (i.e.
cutting-edge / state-of-the-art / superior) the service is, there is no substitute for hiring the right
people, training them effectively, and putting them into an environment that nurtures (i.e. develops)
their success. Many service providers have found that another strategic approach is also necessary
to eliminate the problems inherent / inbuilt in heterogeneity: the use of money-back guarantees. If
the firm expects that even with tight controls, there will be the chance for a disgruntled customer,
, the offering of a money-back guarantee may alleviate / ease / lessen any post-production
dissonance / conflict / disagreement that might arise due to service provider-customer interactions.
(Source: Douglas West, John Ford, Essam Ibrahim ‘Strategic Marketing: Creating Competitive
Advantage’)
Note: heterogeneity is a fundamental characteristic of services which results in variation from one
service to another, or variation in the same service from day-to-day or from customer-to-customer.
Heterogeneity makes it hard for a firm to standardize the quality of its services. Opposite of
homogeneity.
Inseparability
The service cannot be separated from the provider of the service in the mind of the service
customer. This creates challenges. Companies can foster / adopt a more proactive (i.e. active /
hands-on) involvement on the part of the customer. Another way to deal with this issue is to look at
the matter of location. The production must be brought to the customer, so providing additional
locations for the service provision (i.e. providing / delivery) and training personnel to handle
effectively greater demand for the service. Another strategic approach that could help involves
training service personnel to deal with problematic customers in order to reduce the potential for
customer dissonance / conflict / disagreement. Vocal, problematic customers can negatively affect
the other customers involved, and moving them quickly out of the area into a manager’s office
where their difficulties can be addressed by a manager can greatly enhance the experience for all
concerned.
(Source: Douglas West, John Ford, Essam Ibrahim ‘Strategic Marketing: Creating Competitive
Advantage’)
Note: inseparability is a characteristic of services that makes them inseparable (1) from their means
of production, and (2) from the customer's experience of them (i.e. their consumption).
Inseparability requires that a consumer of a service interacts (sometimes physically) with its
producer to receive its benefits.
Perishability
Since services cannot be stored in inventory, they are perishable. Dealing with the peaks (i.e. highest
point of demand) and troughs (trough is the lowest point of the business cycle; in this context it is
referring to the lowest point of demand) of demand can only be handled either through flexing /
adjusting capacity or shifting demand. There are a number of ways that have been found over the
years to synchronise (i.e. match) supply and demand. These include:
• Differential pricing to shift demand to slower time periods (e.g. off-peak prices for hotel
rates).
• New services provided to customers while waiting (e.g. movies on TV screens while queuing
/ in line).
• New service opportunities in off-peak time periods (e.g. free oil-change if your car is serviced
at off-peak times).
• The use of reservations systems (helps keep better track of supply and demand).
• Flexing / adjusting capacity to have more staff on duty during peak times and less for slower
times (like McDonalds or Pizza Hut).
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