UNIT 1

Concept of Services:

Service marketing is marketing based on relationship and value. Marketing services is

different from marketing goods because of the unique characteristics of services.

Contribution and reasons for the growth of services sector

Contributions of the Services Sector

1. Economic Growth
o Services contribute significantly to GDP in most economies, especially in
developed and emerging markets. They often surpass agriculture and
manufacturing in their economic output.
2. Employment Generation
o The services sector creates vast employment opportunities, particularly in
areas like healthcare, education, information technology, and tourism.
3. Enhancing Productivity
o Many services, such as financial services, logistics, and telecommunications,
act as enablers for other industries by improving their efficiency and
productivity.
4. Innovation and Knowledge Creation
o The sector fosters innovation, especially in IT, digital services, and research-
driven fields. It also drives knowledge creation and dissemination through
education and media.
5. Export Earnings
o Many countries have capitalized on exporting services like software
development, BPOs (Business Process Outsourcing), and tourism,
contributing to foreign exchange earnings.
6. Improving Quality of Life
o Services such as healthcare, education, and entertainment directly enhance
societal well-being and quality of life.

Reasons for the Growth of the Services Sector

1. Economic and Structural Changes

 Shift from Agriculture and Manufacturing: As economies develop, there is a natural

progression from agriculture to manufacturing and then to services. Developed
nations often see services dominate their economic landscape.
 Urbanization: Increasing urban populations drive demand for infrastructure,
transportation, and entertainment services.
2. Technological Advancements

 Digitization: The rise of digital platforms and online services has expanded the scope
of the services sector, including e-commerce, fintech, and remote healthcare.
 Automation and AI: Innovations in technology have increased efficiency and the
variety of services offered.

3. Globalization

 Outsourcing and Offshoring: The globalization of trade has allowed services like IT,
customer support, and consultancy to flourish internationally.
 Tourism Growth: Easier travel and increased connectivity have boosted international
and domestic tourism.

4. Demographic and Social Changes

 Rising Incomes: Higher disposable incomes have led to increased spending on leisure,
education, and luxury services.
 Aging Populations: Aging demographics in many countries have driven demand for
healthcare, retirement planning, and related services.

5. Policy and Institutional Support

 Liberalization: Many governments have liberalized their services sectors, encouraging

foreign direct investment (FDI) and private sector involvement.
 Regulatory Frameworks: Improved regulatory environments have enhanced trust and
efficiency in financial and professional services.

6. Changing Consumer Preferences

 Experience-Based Economy: Modern consumers value experiences over goods,

leading to growth in hospitality, entertainment, and wellness industries.
 Customization: The ability to offer tailored services has created a competitive edge in
sectors like finance, healthcare, and IT.

7. Environmental and Sustainable Development

 Green Services: The demand for services related to renewable energy, sustainable
practices, and environmental consultancy has risen with global focus on sustainability.

Unique characteristics of Services

1. Intangibility

 Definition: Services cannot be seen, touched, tasted, or stored before consumption.

 Implications: Customers rely on trust, reputation, and past experiences when choosing
a service. For example, you cannot "test drive" a medical consultation or a financial
advisory session the way you can test a car.
2. Inseparability

 Definition: Services are produced and consumed simultaneously. The service provider
and the consumer often need to be present for the service to be delivered.
 Implications: Quality of the service depends heavily on the interaction between the
provider and the consumer. For instance, a haircut requires the presence of both the
hairdresser and the customer.

3. Perishability

 Definition: Services cannot be stored for future use or sale. Unused service capacity at
a given time is lost forever.
 Implications: Demand forecasting and capacity management are crucial. For example,
an empty hotel room or an unsold airline seat represents lost revenue.

4. Variability (Heterogeneity)

 Definition: Services are often inconsistent and vary depending on who provides them,
when, where, and how.
 Implications: Standardizing service quality can be challenging. For example, the
experience of dining at a restaurant may vary based on the chef, waiter, or time of
visit.

5. Lack of Ownership

 Definition: Services do not result in ownership. Consumers pay for the experience or
benefit rather than a physical product.
 Implications: Customers can only use or experience services temporarily. For
example, buying a gym membership gives access to facilities but not ownership of the
equipment.

6. Customer Participation

 Definition: Customers often play an active role in the production and delivery of
services.
 Implications: The quality and outcome of the service can depend on the customer’s
involvement. For instance, in education, the learning experience depends on the
student’s engagement.
7. Intense Human Involvement

 Definition: Many services rely on the skills, attitude, and performance of people
delivering them.
 Implications: The "human touch" can influence the quality of service, as seen in
healthcare, hospitality, or customer service industries.

8. Simultaneity of Production and Consumption

 Definition: Services are consumed at the point of delivery, and there is no inventory
or delay.
 Implications: Real-time delivery requires high efficiency and coordination, such as in
public transportation or live events.

9. Personalization

 Definition: Services can often be customized to meet individual customer needs and
preferences.
 Implications: This creates opportunities for differentiation and customer satisfaction.
For example, financial advisory services are tailored to each client’s goals and risk
appetite.

10. Relationship-Oriented

 Definition: Services often involve building long-term relationships with customers.

 Implications: Trust, satisfaction, and customer loyalty are critical for service
providers, as seen in banking, healthcare, and consultancy.

Classification of service

1. Classification Based on the Target Market

a. Consumer Services

 Services offered directly to individual customers for personal use.

 Examples: Healthcare, education, entertainment, personal grooming, and hospitality.

b. Business Services
  Services provided to businesses to support their operations.
 Examples: Consultancy, IT services, logistics, legal services, and facility
management.

2. Classification Based on Nature of the Service

a. Tangible Services

 Services that are closely tied to a physical good or product.

 Examples: Restaurants (food and dining experience), car repair (parts and labor).

b. Intangible Services

 Purely intangible offerings with no physical component.

 Examples: Consulting, legal advice, online streaming.

3. Classification Based on Delivery Mode

a. People-Based Services

 Services that rely on human effort and interaction.

 Examples: Teaching, nursing, counseling, and hairstyling.

b. Equipment-Based Services

 Services delivered through the use of technology or machinery with minimal human
intervention.
 Examples: ATMs, self-checkout systems, online banking.

4. Classification Based on Relationship with the Customer

a. Continuous Services

 Services provided over a prolonged period, often involving a subscription or long-

term agreement.
 Examples: Internet services, insurance, utility services.

b. Discrete Services

 Services offered as a one-time transaction or on a short-term basis.

 Examples: Event photography, car rental, pest control.
5. Classification Based on Purpose

a. Essential Services

 Services considered necessary for daily living or societal functioning.

 Examples: Healthcare, public transportation, education.

b. Non-Essential (Luxury) Services

 Services that enhance comfort, lifestyle, or leisure but are not critical.
 Examples: Spa treatments, luxury cruises, premium club memberships.

6. Classification Based on Sector

a. Public Services

 Services provided by the government or public sector for the welfare of citizens.
 Examples: Police, firefighting, public education.

b. Private Services

 Services offered by private businesses or individuals for profit.

 Examples: Retail, private clinics, private tutoring.

7. Classification Based on Customization

a. Standardized Services

 Uniform services provided to all customers without customization.

 Examples: Fast-food chains, public transportation.

b. Customized Services

 Tailored services designed to meet specific customer needs.

 Examples: Personalized financial planning, bespoke tailoring.

8. Classification Based on Industry

a. Financial Services

 Banking, insurance, wealth management, and investment advisory.

b. Professional Services
  Legal advice, auditing, engineering, and architecture.

c. Hospitality and Tourism

 Hotels, restaurants, travel agencies, and tour operators.

d. Information Technology Services

 Software development, IT consulting, and cloud computing.

e. Healthcare Services

 Hospitals, clinics, and telemedicine.

f. Education and Training Services

 Schools, colleges, skill development centers.

g. Entertainment Services

 Cinema, online streaming, theme parks.

9. Classification Based on Interaction

a. High-Contact Services

 Require significant interaction between the customer and the provider.

 Examples: Healthcare, hospitality, education.

b. Low-Contact Services

 Minimal interaction between customer and provider.

 Examples: Utility services, automated banking, online subscriptions.

Growth of the Service Sector

1. Key Drivers of Service Sector Growth

a. Economic Development

 Structural Transformation: As economies develop, there is a shift from agriculture to

manufacturing and then to services. Developed nations often have a services sector
that contributes more than 70% of GDP.
  Rising Incomes: Increased disposable income leads to greater demand for services
such as healthcare, education, entertainment, and tourism.

b. Technological Advancements

 Digitization and Automation: Technology has enabled the creation of new service
industries like e-commerce, cloud computing, and fintech.
 Communication Technology: Improved connectivity has facilitated global
outsourcing and remote service delivery, such as customer support and IT consulting.

c. Globalization

 Trade Liberalization: Deregulation and free trade agreements have expanded

international markets for services.
 Outsourcing and Offshoring: Many businesses outsource non-core services like IT,
HR, and finance to specialized service providers, boosting the sector.

d. Demographic Shifts

 Aging Populations: An aging global population has increased demand for healthcare,
elder care, and retirement services.
 Urbanization: Rapid urbanization has driven demand for infrastructure, public
utilities, and urban lifestyle services.

e. Changing Consumer Preferences

 Experience Economy: Consumers increasingly value experiences, leading to growth

in hospitality, entertainment, and wellness services.
 Customization and Convenience: Services that offer personalized solutions and ease
of access, such as online shopping and streaming platforms, have seen significant
growth.

f. Policy Support

 Government Investment: Many governments prioritize the development of service

industries like education, healthcare, and public transport.
 Liberalization: Deregulation in sectors like finance, telecommunications, and aviation
has stimulated competition and growth.

2. Trends in the Growth of the Service Sector

 Dominance in GDP Contribution: In most developed economies, the services sector

accounts for the largest share of GDP.
 Employment Generation: The sector is a significant source of job creation, offering
diverse roles across skill levels.
 Export-Oriented Services: Countries like India and the Philippines have become
global hubs for IT and BPO services.
  Integration with Other Sectors: Services like logistics, marketing, and finance are
integral to the success of agriculture and manufacturing.

3. Examples of High-Growth Service Industries

1. Information Technology and Software Development: The backbone of the digital

economy.
2. Healthcare and Wellness: Driven by aging populations and increased health
awareness.
3. Tourism and Hospitality: Enhanced by better connectivity and disposable income.
4. Financial Services: Includes banking, insurance, and investment management.
5. Education and Training: Growth in online learning and skill development programs.
6. Entertainment and Media: Streaming platforms, gaming, and digital content creation.

4. Challenges in the Growth of the Service Sector

 Quality and Standardization: Ensuring consistent quality in service delivery can be

difficult due to its intangible nature.
 Skill Development: The growing demand for skilled workers requires continuous
investment in education and training.
 Technology Disruption: Automation and AI may displace jobs in traditional service
roles.
 Sustainability: Rapid urbanization and tourism can lead to environmental and resource
management challenges.

5. Future Prospects

The services sector is expected to continue its expansion, particularly in emerging markets.
Growth areas include:

 Digital Services: AI, cloud computing, cybersecurity, and blockchain.

 Green Services: Renewable energy, sustainability consulting, and eco-tourism.
 Health and Wellness: Advanced medical technologies and mental health services.
 Education Technology: Online learning platforms and skill-based training.

Difference between Services and Products

1. Intangibility
  Services: Intangible; they cannot be seen, touched, or stored. For example, a haircut
or legal consultation is an experience or benefit rather than a physical object.
 Products: Tangible; they can be seen, touched, and stored. For instance, a car or a
book is a physical item.

2. Perishability

 Services: Perishable; they cannot be stored for future use. Once a service is delivered,
the opportunity to sell it is gone (e.g., an unsold airline seat).
 Products: Non-perishable; they can often be stored and used later, depending on the
product's shelf life.

3. Inseparability

 Services: Simultaneous production and consumption. The provider and the consumer
often need to interact for the service to be delivered (e.g., a doctor's consultation).
 Products: Produced and consumed separately. A product is manufactured, distributed,
and then consumed by the buyer.

4. Variability (Heterogeneity)

 Services: Highly variable; the quality can differ based on who provides the service,
when, and where (e.g., the experience at a restaurant depends on the chef and staff).
 Products: Standardized; the quality is consistent, especially in mass-produced items
(e.g., a smartphone model).

5. Ownership

 Services: No transfer of ownership; customers pay for the right to access or use a
service temporarily (e.g., renting a car, attending a concert).
 Products: Ownership is transferred to the buyer upon purchase (e.g., buying a
television or furniture).

6. Measurability

 Services: Difficult to measure in physical terms; quality is often subjective and

depends on customer experience.
 Products: Measurable in physical terms like size, weight, and dimensions.
7. Customer Involvement

 Services: Often require customer participation during the delivery process (e.g., a
fitness class).
 Products: Generally do not require customer involvement in the production process.

8. Customization

 Services: Frequently tailored to meet individual customer needs (e.g., financial

planning, personal training).
 Products: Typically standardized but can sometimes be customized (e.g., custom-built
computers).

9. Delivery Mode

 Services: Delivered in real-time and cannot be transported (e.g., online tutoring or in-
person medical services).
 Products: Transportable; they can be delivered to the consumer at a later time.

10. Examples

 Services: Education, banking, healthcare, entertainment, tourism.

 Products: Clothing, electronics, vehicles, packaged food items.

Summary Table

Aspect Services Products

Tangibility Intangible Tangible
Perishability Perishable Non-perishable
Produced and consumed Produced and consumed
Inseparability
simultaneously separately
High (depends on provider and
Variability Low (standardized quality)
context)
Ownership No ownership transfer Ownership transfer occurs
Measurability Subjective Objective and measurable
Customer
Often required Usually not required
Involvement
Customization High Often standardized
Delivery Mode Real-time Delayed delivery possible
Service Continuum

The service continuum is a conceptual framework that illustrates the spectrum of offerings
between pure products (tangible goods) and pure services (intangible activities). Most
offerings in the market fall somewhere in between, as they combine elements of both goods
and services.

1. Key Concepts of the Service Continuum

 Pure Goods: Entirely tangible, physical items with no associated service (e.g., raw
materials, groceries).
 Pure Services: Entirely intangible offerings with no physical product component (e.g.,
psychotherapy, live performances).
 Hybrid Offerings: Most market offerings combine both tangible and intangible
elements, such as a smartphone (product) with warranty and customer support
(services).

2. The Service Continuum Spectrum

The continuum moves from pure goods to pure services, with examples at each stage:

1. Pure Goods
o Example: Salt, sugar, raw materials.
o Characteristics: Fully tangible, no service component.
2. Goods with Minor Services
o Example: A car with basic warranty or manual.
o Characteristics: Tangible product with minimal service integration.
3. Hybrid Offerings (Goods with Significant Services)
o Example: Smartphones with after-sales support, restaurants (food + service).
o Characteristics: Equal emphasis on product and service components.
4. Services with Supporting Goods
o Example: Airline travel (service) with complementary in-flight meals (goods).
o Characteristics: Core service with tangible elements to enhance the
experience.
5. Pure Services
o Example: Therapy, consultancy, live performances.
o Characteristics: Entirely intangible, no physical goods involved.

3. Implications of the Service Continuum

a. Marketing Strategy

 Offerings closer to the product end require strategies emphasizing quality, durability,
and physical attributes.
  Offerings closer to the service end focus on trust, experience, and customer
relationships.

b. Customer Expectations

 Customers expect consistency and reliability in goods.

 For services, they value personalization, quality of interaction, and responsiveness.

c. Value Addition

 Combining goods and services can enhance customer satisfaction and loyalty (e.g.,
bundling a product with installation or maintenance).

4. Examples Along the Continuum

Position on Continuum Example Description

Entirely tangible, no associated
Pure Good Packaged food
service.
Goods with Minor Furniture with assembly Product includes minor support
Services guide service.
Combines food (goods) and dining
Hybrid Offering Restaurant
experience.
Services with Supporting Service with tangible elements like
Airline travel
Goods meals.
Completely intangible with no physical
Pure Service Counseling
product.

Importance and features of service marketing

Importance of Service Marketing

Service marketing plays a vital role in promoting intangible offerings and ensuring their
successful delivery to the target audience. Its importance arises from the unique
characteristics of services and the growing dominance of the service sector in global
economies.

1. Economic Significance

 The service sector contributes significantly to GDP and employment in most

countries.
 Industries like healthcare, education, IT, and tourism rely heavily on effective service
marketing to sustain growth.
2. Relationship Building

 Focuses on building long-term customer relationships through trust and satisfaction,

fostering customer loyalty and retention.

3. Differentiation

 Helps service providers stand out in a competitive market by emphasizing unique

features such as quality, customer experience, or customization.

4. Intangible Nature

 Since services cannot be seen or touched, marketing creates a sense of value and
builds customer confidence through branding, testimonials, and tangible cues.

5. Adaptability to Changing Needs

 Allows businesses to adapt to customer demands and market trends by emphasizing

flexibility, innovation, and responsiveness.

6. Enhancing Customer Experience

 Service marketing focuses on creating memorable experiences that lead to customer

satisfaction and positive word-of-mouth promotion.

7. Global Reach

 With advancements in technology, service marketing enables businesses to reach

international customers, especially in IT, consultancy, and e-commerce sectors.

Features of Service Marketing

The unique nature of services requires specialized marketing approaches. Below are the
defining features of service marketing:

1. Intangibility

 Description: Services cannot be seen, touched, or stored before consumption.

 Implication: Marketers rely on brand reputation, customer testimonials, and visual
cues (like images of facilities) to convey quality.

2. Inseparability
  Description: Services are produced and consumed simultaneously, often requiring the
provider and customer to interact.
 Implication: Emphasizing the quality of the interaction between staff and customers is
crucial (e.g., training employees in customer service skills).

3. Perishability

 Description: Services cannot be stored for future use; unused capacity is lost (e.g., an
empty hotel room).
 Implication: Service marketing strategies focus on demand forecasting, promotions,
and pricing to optimize capacity utilization.

4. Variability (Heterogeneity)

 Description: Service quality can vary based on who provides it, when, and where.
 Implication: Standardizing processes and maintaining quality consistency through
training and feedback systems is key.

5. Lack of Ownership

 Description: Customers pay for access to or the use of a service but do not own it
(e.g., streaming subscriptions).
 Implication: Marketers emphasize the benefits, convenience, and experience
associated with the service rather than ownership.

6. Relationship-Oriented

 Description: Services often involve ongoing interactions and relationships between

the provider and the customer.
 Implication: Service marketing highlights trust, personalized experiences, and
customer loyalty programs.

7. Tangible Cues

 Description: Marketers use physical elements (e.g., uniforms, facilities, or websites)

to convey the quality and professionalism of the service.
 Implication: Effective branding and design can help build customer confidence in
intangible services.
8. Customer Involvement

 Description: Customers often play an active role in service delivery (e.g., choosing
options in a self-service kiosk).
 Implication: Marketing must ensure a user-friendly and engaging experience for
customers during service delivery.

9. People-Centric

 Description: The quality of services depends heavily on the people delivering them.
 Implication: Training staff and maintaining high service standards are essential for
successful service marketing.