Services Marketing Management 324
CHAPTER 1: INTRODUCTION TO SERVICES
What are services?
• When we want to define services, we ask the • When we look at services, we classify services using
question: What do we mean with service? Lovelock’s Classification
• WHY? We firstly say that a service is delivered by a
(1) Services Industries → Provides services to
people, organisations and technology; and it is
businesses and final customers (e.g., mobile or
delivered to achieve desired outcomes. We classify
email communications services between
services because it is a better way of understanding
businesses and clients; Netflix providing
how services are delivered and experienced. This
entertainment to the customer
creates a much more dimensional perspective of
(2) Services as products → An on-demand service what we should consider, and thus makes it easier
(“the transition of service production and a to manage and to think strategically on how to make
delivery model in which a product ties the service decisions.
sold by a seller/vendor to a website or an open- • Lovelock’s Classification is based on the process
market platform”) perspective.
The Tangibility Spectrum
(3) Services experience → The customer experience
is the sum of the entire customer journey with
the business, from the beginning to the end. It
includes every interaction between the
consumer and the business. It consists of three
components – (1) Technology, (2) the product
itself/how it works and (3) the design of the
customer experience
• The tangibility spectrum moves from the left-hand
side where products are dominantly tangible to
(4) Customer service → Relates to services as
dominantly intangible
experience but it is NOT the same. Focused
• The broad definition of services implies that
primarily on human interaction and is supposed
tangibility is a key determinant of whether an
to support customers. Customer service
offering is a service or not. Although this is true, it
therefore provides assistance and advice for a
also remains true that very few products are purely
service or product as needed (There is a human
intangible or purely tangible → Services tend to be
element and a voice representing the business).
more intangible than manufactured products, and
manufactured products tend to be more tangible
than services.
,• E.g., The fast-food industry, while classified as a • How is value created? → Value is created not when
service, also has a few tangible components such as exchange occurs (i.e., when you buy the razor) but it
the food, the packaging, etc. is actually created when you use the razor.
• When we talk about services, the effect on • E.g., when you drive a car, you have certain feelings
customers is that customers have difficulty in and that is over and above to what the car actually
evaluating competing services because high levels of does for you. So, it is actually while you use the car
risk are perceived that value is created.
• Consumers place great emphasis on personal
information and a service’s price are usually used as Service and Technology
a basis to assess quality • Technology, specifically information technology, is
• The resultant effect on how management responds currently shaping the field and heavily influencing
given the fact that customers perceive services high the practice of service marketing
in risk is to reduce the service complexity which can
be done by expressing tangible cues (1) Technology-Based Service Offerings
• Perceptions of risk level can be lowered by focusing - It is apparent how technology is the basic force
on word-of-mouth recommendation and the quality behind service innovations
of service - Looking to the pass; automated voice mail, cell
phones, ATM’s and other common services were
Service dominant logic all made possible because of new technologies
- More recently, internet-based companies like
• Service dominant logic is an alternative theoretical
Amazon and Google offer services that were
framework that explains value creation through the
previously unheard of and smart phones now
exchange amongst different entities
offer service applications
• The value derived from physical goods is actually the
- All of these services that depend on data being
service provided by the good, and not the good itself
transmitted from machines are part of what is
• Value is therefore co-created between the company
known as the Internet of Things (IOT), which is
selling goods and services and the customer using it
currently generating new service opportunities
• E.g., Gillete → They are not selling a razor, they are
selling personal hygiene (2) New ways to deliver service
- In addition to providing opportunities for new
service offerings, technology is providing
approaches for delivering existing services in
more accessible, convenient and productive
ways
- Technology facilitates basic customer service
functions (i.e., bill paying), transactions (both
• From a branding perspective, this is important
retail and business-to-business) and learning or
because you are not selling a product with a purely
information seeking
functional value but a product that actually provides
- Evolving technologies have forever changed
an emotional value
customer service
• The Value-In Use Creation Model - Companies have shifted from face-to-face
services → telephone-based services →
widespread use of interactive voice response
systems → Internet-based customer service →
wireless service
- Technology also facilitates transactions by
offering a direct vehicle for making purchases
and conducting a business
- Finally; technology, more specifically the
internet, offers an easy way for customers to
learn, do research and collaborate with each
other.
,(3) Enabling Both Customers and Employees - It can facilitate social interaction and closeness
- Technology enables both customers and amongst people, but it can also isolate or separate
employees to be more effecting in getting and them
providing a service - Customers also have concerns about their privacy
- With self-service technologies, customers can and confidentiality, as some firms seek to learn
serve themselves more effectively (e.g., online about and interact directly with customers through
banking) the internet
- Online shopping and other service applications - Employees may also be reluctant to accept and
available via the internet and smart phones have integrate technology into their work lives –
also changed the lives of consumers forever especially when they perceive, rightly or wrongly,
- For employees, technology can provide that the technology will substitute for human
tremendous support in making them more labour and perhaps even eliminate their jobs
effective and efficient in delivering service (e.g., - With technology infusions, comes a loss of human
Customer relationship management and sales contact which many may believe is detrimental
support software) purely from a quality of life and human
- By having immediate access to information about relationships perspective
product and service offerings, as well as about - Lastly, the payback in technology investments is
particular customers, employees are able to better often uncertain – it may take a long time for an
serve them investment to result in productivity or customer
- This kind of information allows employees to satisfaction gains
customize their services to fit the customer’s
needs Characteristics of Services Impacting
on Marketing Activities
(4) Extending the Global Reach of Services (1) Intangibility
- Technology infusion results in the potential for - The most basic distinguishing characteristic of
extensively reaching out customers from all services is its intangibility
around the globe in ways that were not possible - Services are performances or actions rather than
before objects; therefore, they cannot be “sensed” (seen,
- The internet has no boundaries, therefore felt, tasted or touched) in the same manner as
information, customer service and transactions tangible goods
can move across countries and continents - No inventory!
- Technology also allows employees of international - The resulting marketing implications (challenges)
companies to stay in touch easily – to share ▪ Services cannot be patented easily, and new
information, ask questions or to serve on virtual service concepts can therefore easily be
teams together copied by competitors
(5) The Internet is a Service ▪ Services cannot be readily displayed or
- An interesting way to look at the influence of easily communicated, so quality may be
technology is to realize that the Internet is just one difficult for customers to assess
big service ▪ Decisions about what to include in
- All businesses and organizations that operate on advertising and other promotional materials
the internet are essentially providing a service – are challenging, as well as pricing (the actual
whether they are giving information, performing costs of a “unit of a service” are hard to
basic customer service functions, facilitating determine)
transactions or promoting social interactions (2) Heterogeneity
amongst individuals - Because services are performances usually
produced by humans, no two services will be
(6) The Paradoxes and Dark Side of Technology and
exactly alike
Service
- Employees that deliver the service frequently are
- Technology can facilitate a sense of freedom and
the service in the eyes of the customer, and people
independence for individuals, but it can also be
may differ in their performance from day to day
constraining or restrictive if it is perceived as
- Employee and customer interaction = customer
inflexible
satisfaction
, - Heterogeneity also occurs because no two experience of the customer (i.e., employees affect
customers are exactly alike – each will have unique the outcome)
demands or will experience the service in a unique - The resulting marketing implications
way ▪ Mass production may be quite difficult due
- Thus, the heterogeneity connected with services is to the fact that services are often produced
largely the result of human interaction between and consumed at the same time
and among employees and customers ▪ The quality of service and customer
- The resulting marketing implications satisfaction will be highly dependent on
▪ Because services are heterogenous across what happens in “real time”, including the
time, organizations and people; ensuring actions of employees and the interactions
consistent service quality may be between employees and customers
challenging
(4) Perishability
▪ Quality depends on many factors that
- Perishability refers to the fact that services
cannot fully be controlled by the service
cannot be saved, stored or returned
supplier such as the ability of the customer
- E.g., a bad haircut cannot be returned or resold
to articulate their needs and the ability and
to another customer
willingness of personnel to satisfy those
- It is also difficult to synchronize supply and
needs, the presence (or absence) of other
demand
customers and the level of demand for their
- It should be noted that there are services such as
service
education and entertainment where
▪ Because of these factors, the service
performances can be captured, replayed or
manager cannot always be sure whether the
rebroadcasted again
service is being delivered in a manner
- The resulting marketing implications
consistent with what was originally planned
▪ The primary challenge is the inability to hold
and promoted – and if customers receive
stock → Demand forecasting and creative
inconsistent service that does not match
planning for capacity utilization are
with what the brand promised, this may
therefore important decision areas
impact their future brand choice
▪ Strong recovery strategies when things do
▪ Sometimes services may be provided by a
go wrong are also needed as services cannot
third part which further increases the
typically be returned or resold – this
potential heterogeneity of the offering
includes the customer’s goodwill
▪ However, some of this variation can be
reduce by replacing human inputs with The Services Triangle
automation or through the adoption of
quality control improvement procedures • Service marketing is about making and keeping
promises
(3) Inseparability • The strategic framework known as the services
- Goods: Produced → Sold → Consumed marketing framework shows the three interlinked
- Services: Sold → Produced and consumed groups that work together to develop, promote and
- Inseparability refers to that there is a simultaneous deliver service promises
production and consumption of the service and in • These three interlinked groups are (1) the company,
order to successfully deliver your service, you have (2) employees/technology and (3) the customers
to decentralize your service delivery • The type of marketing that must be performed to
- Inseparability means that customers will successfully deliver the service when it takes place
frequently interact with each other during the between the company and the customer is referred
service production process and thus may affect to as external marketing (making the promise),
each other’s experiences (e.g., strangers seated which takes the form of communication
next to each other in an aeroplane may well affect • When we think of the type of marketing that takes
the nature of the experience for each other) place between the customer and the
- Another outcome of simultaneous production and employee/technology, we talk about interactive
consumption is that service providers find marketing delivering the promise
themselves playing a role as part of the product
• When we look at the type of marketing that occurs
itself and as an essential ingredient in the service
between the company and the
