Unit 1: Introduction to Service Marketing

Meaning of Service Marketing:

In marketing, not only physical products (goods) are called products but services like
ideas, thoughts and experiences are also included in the sense of products. Out of total
consumable expenses more than 50 percent of our purchasing is of services. For example,
services like repairs, medical care, consultancy, hotel accommodation, banking, insurance etc.
are consumed substantial in our life,
The most comprehensive definition of a service has been given by Philip Kotler, who
defines a service as an act or performance that one party can offer to another that is essentially
intangible and does not result in the ownership of anything. Its production may or may not tied
to a physical product.
The American Marketing Association defines services as, "activities, benefits or
satisfaction which are offered for sale or are provided in connection with the sale of goods."
The services described the in the second half of the definition are those included in the sale of
physical products to the customers, e.g., services of installation of plant, its maintenance and
repairs, credit and delivery services etc. But, specially in service marketing our concentration
primarily is on the first part of the definition.
There is a regular market for such services represented by activities, benefits and
satisfactions offered for sale by providers of services. These services may be labor services
(domestic, office, factory etc.), personal services (hand laundry, barber, photographer),
professional services (accountant, lawyer, musician, engineer, consultant etc. ) or institutional
services such as offered by transport, banking, insurance, advertising and such other service
organizations.
When a customer buys a service in the service market, he buys the time, knowledge,
skills or resources of someone else who is the provider of a service. The buyer receives
satisfactions or benefits from the activities of the provider who may be an individual, a firm or
a company.
Services are economic activities that create value and provide benefits for customers in
specific times and places Services are those separately identifiable, essentially intangible
activities which provide want satisfaction, and that are not necessarily tied to the sale of a
product or another service. To produce a service may or may not require the use of tangible
goods. However, when such use is required, there is no transfer of title to these tangible goods.
Due to the distinct features of service it is quite different in different sense from
physical products. One can not store service due to its perishable nature. Services are intangible
and undividable so we can not touch, taste and see the services prior to consumption. There is
price and quality variability in service which depends on service provider and place of service.
Service can not be separated from producer or provider. For example, we can not separate
doctor's service from doctor. Services are produced and consumed simultaneously. They can
not be stored for later use. For example, an empty seat in a place can not be stored and use later,
it is to be used when the service is being produced.
Due to the increasing prosperity of people, complexity of society, division of labor and
sufficient leisure time the demand for services are increasing day by day. Service marketing is
the function by which a marketer plans, promotes and delivers services for customers and
clients. In the sale of services to customers, what is important is that customers be satisfied, that
their needs and wants be fulfilled by the provider of services.
Importance of Service Marketing:

Due to the increasing prosperity of people, complexity of society, division of labor and
sufficient leisure time the demand for services are increasing day by day. Service marketing is
the function by which a marketer plans, promotes and delivers services for customers and
clients. Since 1950 services of infinity variety have grown up in importance. Thus, the
importance of service marketing has grown up.

At present in many industrialized countries more than 45 percent of the national income
is being derived from personal and industrial services, and 65 percent of jobs are being offered
by the service sector of the economy. Numerous types of services are marketed to customers.

The following reasons for growth in the service markets will justify the importance of
service marketing:

# Demographic changes taking place throughout the world are causing a chain reaction,
which is facilitating the growth of service sector. Today's consumers are time pressured. This
has led to an increase in time saving services such as house keeping, laundry, beauty parlors,
restaurants etc. The time that is saved through the use of these services is being spent on
entertainment, travel and other recreation services.

# The consumers have more and more disposable income, i.e., more and more money to
spend. They are prepared to buy services they are unable to perform or they are unwilling to
perform.

# Division of labour and work specialiasation are the unique features of industrialization.
Many firms are willing to buy specialized services from other service organization. For
example, instead of employing specialists, they want to buy the services
Of specialists such as management consultants, auditors, lawyers, tax experts etc. Hence, we
have now specialized service firms and institutions ever-willing to sell specialized services to
business organizations.

# We have now increasing complexity and sophistication in the jobs needed by consumers
as well as industries. In the olden days as jobs were simple, people and firms could do those
jobs themselves. Today we are living in the world of specialization. Hence, we need experts in
filing our income tax, in maintaining our accounts, in solving our personal care and health
problems and so on. Modern shopping centers are offering increasing cultural and recreational
activities.
Characteristics of Services:
The peculiar characteristics of services create challenges and opportunities to the
service marketer. The following can be regarded as distinctive characteristics of services:
1. Perishability:
As a marketable commodity, a service has a high degree of perishability. Time element
assumes unique importance in service. If a service is not used today, it is lost forever. It can not
be stored for later use. For example, an empty seat in a plane can not be stored and use later, it
is to be used when the service is being produced. Unutilised services are economic losses. A
building unoccupied, credit not utilized, a ship, a wagon or a warehouse loaded to only half of
its capacity, empty rooms in five star hotel etc. are illustrations representing perishable nature
of services.

2. Intangibility:
A physical product like television, soap, pen etc. are visible and concrete products. We
can see them, feel them, touch them, smell them prior to consumption. But, it is not possible to
see, feel, taste and touch services before they are bought. A service by its nature is an abstract
phenomenon. It is not a physical object. It has mental connotations. While selling or promoting
the sale of service we have to concentrate entirely on the benefits and satisfaction a buyer can
derive after buying the service. We can not emphasize the service itself. Banks promote the sale
of credit cards by emphasizing the convenience and advantages derived from possessing a
credit card.

3. Inseparability:
In many service operations, production and consumption can not be separated. In other
words, some services are produced and consumed simultaneously. For example, we can not
separate doctors's service form doctor. Similarly a music programme can take place only with
the music provider. Hence, due to inseparability, direct sale of many services is the only
channel of distribution. The market for offering personal services is bound to be limited. A
person can sell his service only to a limited number of customers in a day. However, when an
institution is acting as a creator of a service, it may have its representatives or agents to sell that
service. For example, a travel agent, an insurance agent, a finance broker etc. may represent
and sell the services supplied by those institutions.

4. Heterogeneity:
The quality of services offered by the competing service providers can not be
standardized. Even the quality of the output of services sold by one seller can not be uniform or
standardized. For instance, a technician can not offer equal quality of service when he is
repairing a number of television sets. Similarly, it is difficult to judge accurately the quality of
services. Payment of price and the quality of actual performance may not have perfect
correlation.
5. Changing Demand:
The market for services has wide fluctuations. These fluctuations in demand may be
seasonal or even by week, days or hours. During night time we need less transport. The use of
telephone services is less during night time. Similarly tourism also has seasonal demand.

6. Pricing of Services:
Perishability, fluctuations in demand and inseparability in services involve significant
implications in pricing of services. Consumers may postpone purchases or perform some
services themselves. Competition plays a secondary role in many services. Quality of services
can not be fully standardized. There are many difficulties in pricing of services. Usually prices
of services are determined on the basis of demand, competition, time and place. Discounts are
also offered in many services, e.g. insurance, hotel etc.