Service Marketing CBMMM6T08

Syllabus topics (RTMNU)

• Services Marketing Concept
• Distinctive Characteristics of Services
• Services Marketing Triangle
• Purchase Process for Services
• Marketing Challenges of Services
• Role of Services in Modern Economy
• Services Marketing Environment
• Goods vs Services Marketing
• Type of Contact: High Contact Services and Low Contact Services

Services Marketing Concept

A service is an act or performance offered by one party to another that is essentially intangible and does not result in ownership of anything (Philip Kotler). Examples: banking, insurance, hotel stay, haircut, education, mobile network.

Services marketing is the process of planning, pricing, promoting and delivering services to satisfy customers' needs at a profit, while managing the special features of services (intangibility, people involvement).

Distinctive Characteristics of Services (IHIP)

1. Intangibility: cannot be seen, touched or tasted before purchase. Marketers use physical evidence (clean office, uniforms) to build trust.
2. Heterogeneity (variability): quality varies with who gives the service, when and where. Solution: training and standard procedures.
3. Inseparability: production and consumption happen at the same time; the customer is often present (doctor and patient).
4. Perishability: services cannot be stored — an empty flight seat or hotel room today is lost revenue.
5. No ownership: the customer gets use or experience, not ownership.

Why services marketing is needed: growth of the service economy, intense competition, rising customer expectations, and the special nature of services that the traditional 4 Ps cannot handle alone.

Services Marketing Triangle

The triangle (Kotler; Zeithaml and Bitner) shows three groups — Company, Employees and Customers — linked by three types of marketing:

• External marketing (company → customers): making promises through advertising, pricing.
• Internal marketing (company → employees): enabling promises through training, motivation, tools.
• Interactive marketing (employees → customers): keeping promises at the "moment of truth".

Purchase Process for Services

1. Pre-purchase stage: need awareness, information search (reviews, word of mouth), evaluation of alternatives, perceived risk is high.
2. Service encounter stage: the customer interacts with staff, facilities and other customers; experience is formed.
3. Post-encounter stage: evaluation of satisfaction, repurchase, loyalty, word of mouth or complaints.

Marketing Challenges of Services

• Hard to show and explain an intangible product.
• Maintaining consistent quality.
• Matching demand with capacity (perishability).
• Difficult pricing — cost is hard to calculate.
• Customer participation can affect quality.
• Difficult to protect ideas (no patents for most services).
• Managing employees who are part of the product.

Role of Services in Modern Economy

The services sector is the largest contributor to India's GVA (over half — check latest Economic Survey figure) and to world trade. Role: employment generation; growth of GDP; foreign exchange through IT and IT-enabled service exports; supports agriculture and industry (banking, transport, logistics); improves quality of life (health, education, tourism); encourages entrepreneurship and start-ups.

Services Marketing Environment

Micro environment: company, suppliers, intermediaries, customers, competitors, public. Macro environment (PESTLE): political, economic, social, technological (digital payments, apps), legal (Consumer Protection Act 2019, IRDAI and RBI rules), and environmental factors.

Goods vs Services Marketing

High-Contact and Low-Contact Services

• High-contact services: customer visits the service facility and interacts closely with staff for a long time — hospitals, hotels, salons, schools, airlines. Staff behaviour and physical surroundings are very important.
• Low-contact services: little or no physical contact; delivered through technology — internet banking, mobile recharge, online insurance, courier tracking. Ease of use and reliability of technology matter most.

Likely exam questions

1. (Long, 8/16 marks) Define services. Explain the distinctive characteristics of services and the marketing challenges they create.
2. (Long, 8/16 marks) Explain the services marketing triangle and distinguish between goods marketing and services marketing.
3. (Short, 4 marks) Explain the purchase process for services.
4. (Short, 4 marks) Distinguish between high-contact and low-contact services.
5. (Short, 4 marks) State the role of services in the modern economy.

Syllabus topics (RTMNU)

• Consumer Behaviour
• Variations in Customer Involvement
• Improving Service Quality and Productivity
• Demand and Capacity Alignment
• Branding of Services - Problems and Solutions
• Efforts on Consumer Loyalty
• Ethics in Services Marketing: Meaning, Importance
• Unethical Practices in the Service Sector
• Managing Quality Aspects of Services Marketing
• Defining Productivity - Improving Productivity

Consumer Behaviour in Services

Consumer behaviour is the study of how people search for, buy, use and evaluate products and services. In services it is special because customers face more risk (they cannot test the service first), depend on word of mouth and reviews, use price and physical evidence as quality signals, and take part in producing the service.

Factors influencing service buying:

1. Cultural and social factors — family, reference groups, social media influencers.
2. Personal factors — age, income, occupation, lifestyle.
3. Psychological factors — motivation, perception, learning, attitudes.
4. Perceived risk — financial, functional, physical, social and time risk; firms reduce it by free trials, guarantees and testimonials.
5. Expectations — desired service, adequate service, and the "zone of tolerance" between them.

Variations in Customer Involvement

• Low involvement: routine, low-risk services — mobile recharge, bus ticket.
• High involvement: costly or risky services — surgery, higher education, insurance, wedding planning; customers search more and are loyal once satisfied.
• Level of participation: low (dry cleaning), moderate (hotel stay), high (fitness training, education) — the more participation, the more the customer affects quality.

Managing Service Quality

Service quality is the gap between what the customer expects and what he perceives he received. The SERVQUAL model (Parasuraman, Zeithaml and Berry) gives five dimensions — RATER:

1. Reliability — doing it right, on time.
2. Assurance — knowledge and courtesy of staff.
3. Tangibles — facilities, equipment, appearance.
4. Empathy — individual care.
5. Responsiveness — willingness to help quickly.

Gaps model: knowledge gap, standards gap, delivery gap, communication gap, and the customer gap (expected vs perceived). Improving quality means closing each gap — customer research, clear standards, training, honest promises.

Productivity: Meaning and Improvement

Service productivity is how efficiently service inputs (staff, time, equipment) are converted into outputs valued by customers. Improving productivity: technology and self-service (ATMs, apps, online check-in); standardised processes; staff training; better scheduling; involving customers (self-service); outsourcing non-core work. Caution — productivity should not reduce quality.

Demand and Capacity Alignment

Because services are perishable, firms must match demand and capacity.

• Managing demand: differential pricing (off-season hotel rates, surge pricing), reservations and appointments, promotions in lean periods, developing off-peak services.
• Managing capacity: part-time staff, cross-training, extending hours, renting extra facilities, customer self-service.
• Queue management: token systems, virtual queues.

Branding of Services: Problems and Solutions

Problems: intangibility, variable quality, difficulty of differentiation, the employee is part of the brand. Solutions: strong name and logo (e.g. Taj, HDFC Bank, Jio); tangible cues (uniforms, decor); consistent standards across outlets; employee branding; slogans and storytelling; service guarantees.

Efforts for Consumer Loyalty

Loyalty programmes (airline frequent flyer miles, hotel points), relationship marketing, personalised service, service recovery after failure, membership benefits, customer feedback and complaint handling, CRM software.

Ethics in Services Marketing

Meaning: moral principles that guide fair and honest behaviour in marketing services. Importance: builds trust, protects consumers, long-term reputation, legal compliance (Consumer Protection Act 2019), and employee morale.

Unethical practices: mis-selling of insurance and financial products; hidden charges; misleading advertisements; overbilling in hospitals; fake reviews; misuse of customer data; unfair cancellation terms; poor grievance handling.

Promoting ethics: written code of conduct, transparent pricing, honest advertising (ASCI code), protection of personal data (Digital Personal Data Protection Act 2023 — check latest rules), fair grievance redressal (e.g. RBI and IRDAI ombudsman schemes), and training employees in ethical selling.

Managing Quality Aspects — Steps

1. Understand customer expectations through surveys and feedback.
2. Set clear service standards (e.g. answer calls within 3 rings).
3. Train and empower front-line staff.
4. Use technology to reduce errors.
5. Measure performance regularly (mystery shopping, ratings).
6. Plan service recovery — apologise, fix, compensate quickly.
7. Continuous improvement (TQM, Six Sigma).

Likely exam questions

1. (Long, 8/16 marks) Explain service quality. Discuss the SERVQUAL dimensions and ways to improve service quality and productivity.
2. (Long, 8/16 marks) How can a service firm align demand and capacity? Explain the problems and solutions in branding of services.
3. (Short, 4 marks) Explain variations in customer involvement in services.
4. (Short, 4 marks) State any four unethical practices in the service sector.
5. (Short, 4 marks) Write a note on efforts for consumer loyalty.

Syllabus topics (RTMNU)

• Key Elements of Services Marketing Mix
• The Service Product
• Pricing Mix
• Promotion & Communication Mix
• Place/Distribution of Service
• People
• Physical Evidence
• Process-Service Mapping- Flow-charting
• International and Global Strategies in Services Marketing
• Services in the Global Economy- Moving from Domestic to Transnational Marketing

Key Elements of the Services Marketing Mix (7 Ps)

The services marketing mix is the set of controllable tools a service firm uses to satisfy customers. Booms and Bitner extended the 4 Ps (Product, Price, Place, Promotion) by adding 3 Ps — People, Physical evidence and Process — because of the special nature of services.

The Service Product

The service product has levels: core service (main benefit, e.g. a night's stay), supplementary services (Lovelock's "flower of service": information, order-taking, billing, payment, consultation, hospitality, safekeeping, exceptions) and the augmented service (extras that delight). Decisions: service range, quality level, brand, service guarantees, new service development.

Pricing Mix

Pricing services is difficult because costs are hard to measure and customers judge quality by price. Methods: cost-based (cost + margin), competition-based, value-based (what the customer thinks it is worth). Strategies: differential/peak-load pricing (airlines, hotels), dynamic or surge pricing (cab apps), bundling (DTH packs), membership/subscription pricing (OTT, gyms), discount pricing, and psychological pricing (₹499).

Promotion and Communication Mix

Tools: advertising, personal selling, sales promotion, public relations, direct and digital marketing (social media, email, search ads), word of mouth and influencer marketing. Special tasks in services: make the intangible tangible (show people, places), stress reliability, use testimonials, and avoid over-promising.

Place / Distribution of Services

Decisions on location, channels and access. Options: customer goes to the service (hospital), service goes to the customer (home delivery, doorstep banking), or remote delivery (internet banking, e-learning). Channels: direct, franchising (McDonald's, Lakmé Salon), agents and brokers (insurance agents), and electronic channels (apps).

People

Employees and customers who take part in delivery. Front-line staff represent the firm. Decisions: recruitment, training, motivation, empowerment, uniform and grooming, internal marketing; managing customer-to-customer interaction.

Physical Evidence

The environment and tangible items that help customers judge the service — servicescape (building, decor, lighting, music, cleanliness), brochures, website, uniforms, tickets, invoices. Example: a clean, well-lit bank branch suggests a safe bank.

Process: Service Mapping and Flow-Charting

Process is the actual procedures and flow of activities by which the service is delivered.

Service blueprint/mapping is a picture of the service process that shows: customer actions; on-stage (visible) employee actions; back-stage (invisible) employee actions; and support processes, separated by the "line of interaction", "line of visibility" and "line of internal interaction".

Flow-charting lists each step in order to find fail points, waiting points and unnecessary steps. Example — hotel stay: arrive → check in → go to room → stay → order food → check out → pay.

International and Global Strategies in Services Marketing

Modes of entry: exporting services (IT services from India), licensing and franchising, joint ventures, strategic alliances, and wholly owned subsidiaries (bank branches abroad).

Strategies:

• Multi-domestic: adapt the service to each country.
• Global/standardised: same service everywhere (Visa, Google).
• Transnational: global efficiency with local adaptation (McDonald's veg menu in India).

Services in the Global Economy: Domestic to Transnational

Services trade has grown due to technology, liberalisation (WTO's GATS), and global travel. Stages: domestic → export → international → multinational → transnational. Drivers: market drivers (common customer needs), cost drivers, technology drivers (internet, cloud), government drivers (open policies) and competitive drivers. Indian examples: TCS, Infosys and Wipro serving clients worldwide; Taj and OYO hotels abroad.

Challenges: cultural differences, regulations, currency risk, quality control at distance, and data protection laws.

Likely exam questions

1. (Long, 8/16 marks) Explain the elements of the services marketing mix (7 Ps) with examples.
2. (Long, 8/16 marks) What is service mapping or blueprinting? Explain international and global strategies in services marketing.
3. (Short, 4 marks) Explain pricing strategies used for services.
4. (Short, 4 marks) What is physical evidence in services? Give examples.
5. (Short, 4 marks) State the modes of entry into international service markets.

Syllabus topics (RTMNU)

• Recent Trends in Marketing of Services in: Tourism, Hospitality, Health-care, Banking, Insurance, Education, IT and Entertainment Industry
• Use of Artificial Intelligence in Service Marketing
• Influence of AI on Service Marketing

Tourism

• Online travel agencies and apps (MakeMyTrip, IRCTC) for booking; dynamic pricing.
• Experiential, adventure, eco-, medical and spiritual tourism; homestays.
• Social media and travel influencers; virtual tours.
• Government campaigns like "Incredible India" and Dekho Apna Desh.

Hospitality

• Online reviews (Google, TripAdvisor) drive bookings; reputation management.
• Contactless check-in, digital keys, QR menus.
• Cloud kitchens and food delivery platforms (Swiggy, Zomato).
• Personalisation using guest data; loyalty programmes; sustainability (green hotels).

Health-care

• Telemedicine and e-consultations; health apps; e-pharmacies.
• Ayushman Bharat Digital Mission (ABHA health ID) — check latest.
• Preventive health packages, wellness marketing, medical tourism to India.
• Ethical limits on advertising by doctors (National Medical Commission rules).

Banking

• Digital banking, UPI payments, mobile apps, video KYC.
• Neo-banks and fintech partnerships; digital lending.
• Personalised offers through data analytics; chatbots for customer service.
• Financial inclusion — Jan Dhan accounts, business correspondents.

Insurance

• Online comparison and buying (web aggregators); instant policy issue.
• Bima Sugam platform proposed by IRDAI — check latest status.
• Usage-based insurance (pay as you drive), micro-insurance, health and cyber insurance.
• Faster claim settlement using apps and AI.

Education

• EdTech platforms, online degrees, MOOCs (SWAYAM), hybrid learning.
• NEP 2020 — multidisciplinary and skill-based courses; Academic Bank of Credits.
• Digital marketing of institutions; counselling and personalised learning paths.

IT and Entertainment

• IT: cloud services (SaaS), subscription models, cybersecurity services, outcome-based pricing, global delivery model.
• Entertainment: OTT platforms (Netflix, JioHotstar, Amazon Prime Video), regional content, music streaming, gaming, short-video apps, subscription and ad-supported models, recommendation engines.

Use of Artificial Intelligence in Service Marketing

Artificial Intelligence (AI) is the ability of computer systems to perform tasks that normally need human intelligence — learning, understanding language, recognising patterns and making decisions.

1. Chatbots and virtual assistants — 24×7 customer support (e.g. bank chatbots).
2. Personalisation and recommendations — OTT and e-commerce suggest content/products.
3. Predictive analytics — forecasting demand, customer churn.
4. Dynamic pricing — airlines, hotels, cab apps.
5. Customer segmentation and targeting in digital advertising.
6. Voice and image recognition — voice search, face-based check-in (DigiYatra at airports).
7. Sentiment analysis of reviews and social media.
8. Fraud detection in banking and insurance claims.
9. Generative AI for content, ad copies and personalised emails.

Influence of AI on Service Marketing

Firms should combine AI with human staff ("high-tech, high-touch"), be transparent about data use, and follow data protection law (Digital Personal Data Protection Act 2023 — check latest rules).

Likely exam questions

1. (Long, 8/16 marks) Discuss the recent trends in marketing of services in banking, insurance and health-care.
2. (Long, 8/16 marks) Explain the use of Artificial Intelligence in service marketing and its influence.
3. (Short, 4 marks) State recent trends in tourism and hospitality marketing.
4. (Short, 4 marks) Write a note on trends in the entertainment industry.
5. (Short, 4 marks) State any four concerns of using AI in service marketing.