Services Marketing: Meaning, Differences, Components, Importance and Analysis

Read this article to learn about Services Marketing. It’s Meaning, differences, Components, Importance and Analysis of Services Marketing.

Before understanding the meaning of ‘service marketing’ lets first try to understand the meaning of the term ‘service’.

Services Marketing: Meaning, Differences, Components, Importance and Analysis

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Meaning of Services Marketing:

Before understanding the meaning of ‘service marketing’ lets first try to understand the meaning of the term ‘service’.

A service is the action of doing something for someone. It is largely intangible (i.e. not in the form of material). A product is tangible (i.e. material) since you can touch it and own it.

A service tends to be an experience that is consumed at the point where it is purchased, and cannot be owned since it quickly perishes.

A person could go to a cafe one day and have excellent service, and then return the next day and have a poor experience.

So often marketers talk about the nature of a service as:

(i) Inseparable — from the point where it is consumed, and from the provider of the service. For example, you cannot take a live theatre performance home to consume it, (a DVD of the same performance would be a product, not a service).

(ii) Intangible — and cannot have a real, physical presence as does a product. For example, motor insurance may have a certificate, but the financial service itself cannot be touched i.e. it is intangible.

(iii) Perishable — in the sense that once it has occurred it cannot be repeated in exactly the same way. For example – once a 100 metres Olympic final has been run, there will be no other for next four more years, and even then it will be staged at a different place with many different participants and finalists.

(iv) Variability — the human involvement of service provision means that no two services will be completely identical. For example – returning to the same garage time and again for the required services on your car might see different levels of customer satisfaction, or speediness of work.

(v) Right of Ownership — is not taken to the service, since you merely experience it. For example, an engineer may provide service to air-conditioning systems installed at your works’ offices, but you do not own the service, the engineer or his equipment. You cannot sell it on once it has been consumed, and do not take ownership of it.

A service is an intangible product involving a deed, performance, or an effort that cannot be physically possessed. Dominant component is intangible.

Services includes rental of goods, alteration and repair of goods owned by customers, and personal services.

Major differences between goods and services are:

(i) Intangibility;

(ii) Inventory—over/under-booking restaurant capacity;

(iii) Inseparability—of production and consumption; and

(iv) Inconsistency/Consistency.

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Why Tangibilize Services?

Services are intangible by nature. You can’t see, touch, smell, or taste them before you buy them. This intangibility often makes services difficult to depict in clear and meaningful ways.

Many companies’ inability to depict their services tangibly leads to the following symptoms and conditions:

(i) Difficult to Conceptualize – Clients and prospects have difficulty in picturization, in their conscience, the services process and outcomes.

(ii) Difficult to Evaluate – The difficulty in conceptualizing leads to difficulty in evaluating the service.

(iii) Uncertainty and Perceived Risk – Without a clear evaluation framework, the client level of uncertainty and perceived risk rises. Added uncertainty and risk is solemn curse to selling services, especially in new client generation where trust has yet to be established.

(iv) Difficult to Promote the Offering – Difficulty in conceptualizing also leads to difficulty in creating focused marketing communications (from the firm’s perspective) and difficulty in selling the services internally to colleagues (from the client’s perspective).

(v) Difficult to Control Service Quality – The less tangible the process and expected outcomes of a particular service, the more difficult it is to measure the service quality. And, as we all know, what can’t be measured the same, can’t be managed or controlled.

(vi) Difficult to Set Prices –

1. The less we know about the actual service delivery process, the less we understand the cost- basis of providing the service.

2. The less tangible the delivery outputs and expected business outcomes, the less we can establish the business value of the service. Thus, it’s difficult to set price on either a cost-plus basis (#1) and/or a value basis (#2).

Obviously, no one intentionally seeks the above six conditions while marketing, selling, and managing our services. But it happens. Once we tangibilize the services, we can promote them clearly, control service delivery quality, set prices, and minimize the client risk (both perceived and actual) of engaging the services.

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Components of Services Marketing:

Most executives running companies that manufacture and distribute technology based products answer in the affirmative when asked if they have a service marketing function. Historically speaking, this has not always been the case.

The software companies identified the need to implement professional services initiatives, while many long standing product manufacturers were late-comers in recognizing that service held more than a break-fix opportunity.

Remaining constant is the wide ranging role service that marketing plays. High impact service marketing functions are not uncommon. Unfortunately, many service marketing efforts are little more than service support functions.

Many companies have aggressively grown their service revenues by implementing well thought-out and executed plans. Still common are those primarily focused on supporting product marketing.

Others masquerade as service marketers, using cloaking strategies reliant on tactical pricing, and repackaging variations on the same theme. Uncommon are the companies which value service marketing similarly to product marketing.

There are many reasons why companies continue to ignore the huge amounts of revenue and profit available by aggressively marketing service. This paradox is one coming on the way for the ages.

Many companies believe, unfortunately, they are service marketing enabled. These companies have recognized the opportunity, but are not fully engaged. Most are missing their window of opportunity and the desired revenue stream.

The following list outlines key components of an aggressive, growth orientated, service marketing program.

How does your company measure up?

(i) Service is a Business – Marketing current service capabilities to support product sales does not constitute a service marketing program. In this environment, service is relegated to the position of a product feature.

With rare exception, if service is a support function and not a business unit, an effective service marketing effort is not present. It’s difficult to motivate management to invest in a business if there are not quantifiable returns.

Although models can be developed that demonstrate significant positive implications to customer satisfaction, contract renewals, or additional product sales, nothing beats a profit and loss statement in measuring business success.

(ii) Equal Voice – The fragile balance between product support needs and service delivery capabilities are inherently in conflict. In reality, there should be a degree of stress between the groups.

From my experience if a state of harmony exists between sales and service, somewhere unnecessary resources are being expended. What is required, and often difficult to achieve, is a balanced view by executive management.

Typically, management communicates their vision of service and sales as equal partners in moving a company forward in harmony. Often lacking is the special vigilance required, when sales are soft, to ensure the partnership remains intact.

(iii) Strategic Plan – Companies spend hefty amounts of time and expense developing intricate plans for product businesses.

Once these plans are drafted they are usually forwarded to service as a guideline for service planning. Typically service strategic plans include the tactics and resources required to synch the plans.

Unfortunately, most service strategic plans come up short identifying new service business development opportunities. A service strategic plan should include a service marketing plan that outlines growth goals independent of product support needs.

(iv) Market Research – Most service organizations have some vehicle for gathering customer feedback. ‘Customer satisfaction and Voice of the Customer’ surveys, as well as, feedback from product marketing research are most common.

Lacking, in most cases, is specific service market research that examines new or adjacent markets. Too often all service marketing strategies are based on hunches or what is considered to be a safe, incremental step, from current practices.

Progressive service marketing organizations recognize the need to measure the performance of their service organization, competitor’s service operations and other potential market segments.

(v) Brand Management – Successful companies have well defined brands that support their business goals. Marketing communications plans are crafted to ensure the intended messaging, and positioning is communicated to the marketplace.

Most companies spend considerably less, if any, time developing their service branding. Often service’s brand identity is defined by product marketing. This situation creates a major barrier to service growth.

Brand extension strategies are critical to accelerating the growth of a service business. Developing a service branding plan that supports existing business, as well as, opens the door for service business development is critical.

(vi) Resources Available – Service marketing initiatives commonly suffer from under-funding. The manpower, training, tools, and marketing expenses required to launch a new initiative can be considerable.

Typically, assigned budgets are short on time and long on expected returns. This problem is usually the result of either a misconception that new initiatives can be rolled out sharing already over-burdened resources, or the program will immediately gain traction.

New initiatives require new and dedicated resources to drive the business. They also require enough time to test, develop, and implement. Trying to do more, with the same resources, is rarely successful.

(vii) Commitment to Change – For service to attain accelerated growth, or to enter new markets, commitment is required at all levels of an organization. Company executives, division managers, support functions, and field personnels must all share the same vision.

Commonly, service marketing programs are given to go ahead with the caveat that they don’t upset the apple-cart. All parties involved must recognize that new issues and challenges will surface that may negatively impact other areas of the business.

Typically, for a service marketing program to succeed, someone has to feel some pain. It may be the existing distribution channel, product sales, technical support, or hopefully a competitor.

Without a solid commitment by all potentially affected parties, the effort may deprive at the first sign of stress. It’s possible to be successful marketing service without all of the key components discussed.

It’s probable that measured success can be attained when a majority of the items are in place. Success is almost assured when a company has committed to all of the listed requirements.

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Comparative Analysis of Service-Goods:

Researchers and marketers generally agree that the marketing of services involves considerations and tasks that are different than those involved in the marketing of tangible products.

Wilson suggests— “the more intangible the service, the greater will be the difference in the marketing characteristics of the service.” Further, Shostack suggests—”all positioning strategies revolve around the product itself.” Finally, Zeithaml, Parasuraman, and Berry also asserts that services marketing requires a different management approach.

While researchers are finding differences between services marketing and goods marketing, the results are often inconclusive and conflicting. As a result, substantial changes or improvements in services-marketing strategy occur slowly.

The problem may stem from improper or weak definition of the service prior to the creation of research and strategy projects. We believe the performance of Service/Goods Analysis prior to designing marketing research and strategy will improve the definition of a service’s specific characteristics and thereby improve the research focus.

In an attempt to clarify the above issues, the authors first describe the Service/Goods Analysis process and then conclude with a detailed example — how a pure-service product can be analysed to determine which of a service’s marketing characteristics are more like a good than a service.

The results of the analysis are used to focus research efforts (or strategy formulations) on specific service-like characteristics of the product. The results also promote a more effective use of secondary research on both—goods and services—in developing projects and tasks, even for pure services.

The problem centres on the fact that services marketing research is still a relatively new and undeveloped base of knowledge as compared to that for goods. This fact implies that the identification of marketing-related similarities between a specific service product and tangible goods can facilitate the use of some of the larger body of existing, tangible-goods research in service-industry marketing research design and implementation, as well as in marketing strategy formulations. The approach is to determine the extent that each of the service’ elements are more like a tangible product (the good) or an intangible service (the service).

As we identify specific characteristics of services that are more like those of goods than the accepted definitions of services, we can use existing theories, research methods, and marketing strategies, which were developed primarily in the tangible products arena, in the design and implementation of marketing research and strategy projects of service firms.

Thus, it becomes unnecessary for service marketers/researchers to rely as heavily on less established services-marketing research and strategies. Further, we can concentrate our services research efforts on specific characteristics of products that least resembles those of goods.

There are several major differences, including:

(i) The buyer purchases are intangible;

(ii) The service may be based on the reputation of a single person;

(iii) It’s more difficult to compare the quality of similar services;

(iv) The buyer cannot return the service; and

(v) Service Marketing mix adds 3 more p’s, i.e., people, physical environment and process service, and follow-through are keys to a successful venture.

The major difference in the education of services marketing v/s regular marketing is that, instead of the traditional “4 P’s,” i.e. Product, Price, Place, Promotion, there are three additional “P’s” consisting of People, Physical evidence and Process.

Service marketing also includes the servicescape referring to, but not limited to the aesthetic appearance of the business from the outside, the inside, and the general appearance of the employees themselves.

Service marketing has been relatively gaining ground in the overall spectrum of educational marketing as developed economies move farther away from industrial importance to service oriented economies.

There is general agreement that inherent differences between goods and services exist, and that they result in unique, or at least different, management challenges for service businesses and for manufacturers that sell services as a core offering.

(1) Services — On the Basis of Perishability:

Once the services and goods elements are properly classified, we accept that group of elements as the definition of our product. Based on this long, precise definition, we can design our services-marketing research project to investigate specific elements, concentrating on Service elements that are very frequently rated on the service-side of their respective continuums.

For those Goods elements that rate very high on the goods-side of their continuums, we can rely heavily on existing research from the goods arena in our marketing strategy planning and analysis. Thus, we better focus our primary research on specific Service elements of the service product, and make efficient use of secondary research for Goods elements.

The return arrows in the Service/Goods Analysis Process also show that marketing strategy is actually a set of plans to be applied to each of the Service and Goods Elements to adjust or maintain each related benefit. By making adjustments to each of the provided benefits, marketers adjust the bundle of benefits offered by the service product.

(2) Services — On the Basis of Intangibility:

Bateson suggests that intangibility is the critical goods-services distinction from which all other differences originate. The fundamental difference is that services are performances, rather than objects, which cannot be seen, heard, smelled, touched, or tasted in the same manner in which goods can be sensed before they are bought.

Every insured person purchases an intangible asset; for example the insurance policy. It includes promises of reimbursement for covered losses and related legal expenses. Such promises are called coverages, and they provide every insured with at least the three immediate benefits.

This bundle of benefits defines object, and they immediately accrue to every buyer. Since the object is the policy itself, it certainly can be seen, touched, priced, and especially analysed in detail before it is purchased.

In fact, object can be analysed prior to purchase in greater detail than most goods, especially those that are sealed in packages that prevent close pre-purchase examination. Thus, the object exhibits some of the same tangible—like elements of a good.

(3) Services — On the Basis of Inseparability of Production and Consumption:

This characteristic of a service organization suggests that services are typically produced and consumed; at the same time. Zeithaml et al. opines—”Whereas goods are first produced, then sold and then consumed, services are first sold, then produced and consumed simultaneously.”

Carmen and Langeard add that inseparability “…forces the buyer into intimate contact with the production process.” Thus, marketing and production are highly interactive (Gronroos) since the seller and producer of the services are the same entity.

While the object is first sold and then produced, its three major benefits (asset protection, peace of mind, and credit-worthiness) are consumed over the policy period, not at the time of production.

This characteristic is similar to a specially ordered automobile. The insured and the agent order an object to be delivered later with the insured’s preferred limits and types of coverages.

Upon delivery, the transaction for the policy period is usually completes (unless the insured has a covered loss) and consumption begins. This element definitely resembles a good.

Also, the marketing and production functions associated with both—object and service—often are not provided by the same entities, but much less at the same time. For example – the marketing agent may be an independent agent, an exclusive agent, or an employee of the insurer.

In addition, regardless of the distribution channel employed, while most claims processing and settlements are conducted by the insurer, there are independent claims-handling services which may process some claims in some geographic areas.

Even independent agents handle some small claims. Finally, independent attorneys are frequently used in claims settlement processes.

(4) Services — On the Basis of Heterogeneity:

Thomas suggests — “services are highly variable since they depend on who provides them, and when and where they are provided.” Zeithaml et al. adds that “The quality and essence of a service can vary from producer to producer, from customer to customer, and from day-to-day.”

From the above discussion, service meets this heterogeneity-of- service-performances criterion. This implies that service can be differentiated since it possesses this mercurial characteristic. This corresponds with Shostack’s continuum showing services having high divergence.

In conspicuous contrast, the object just as clearly must be classified as highly homogeneous. The coverages (object) are substantially standardized between insurers within individual states where the policies are sold.

Standardization defines object as a commodity with little variation among the individual coverages offered by various standard in each state. Insureds can choose which standardized coverage groups to purchase and the magnitude of amount of coverage for each, but they cannot negotiate or shop around to alter the coverages provided.

Thus, the object is not subject to meaningful differentiation in the coverages offered within each state. This high degree of standardization defines the object as exhibiting high complexity and low divergence (i.e., low in executional latitude), with little deviation experienced from one insured to the other. This again suggests the object is composed of tangible-like elements that are high in search qualities like many goods.

However, service is highly differentia table. An inherent problem with differentiating service is that potential insureds have not yet experienced the services of an insurer that is new to them, so they must rely on other cues; such as initial sales contracts, physical surroundings, correspondences, and additional personal contacts, if any, in order to form an attitude toward the insurer’s service quality. In addition, most current insureds will not experience the insurer’s vital service — claim, service and settlement — for many years after becoming an insured of that insurer.

Thus, service is also high in complexity, but unlike the object, it is high in divergence. Thus, there is substantial opportunity for deviations between the performances of both—ancillary and contingent services.

In addition, ancillary services are high in experience qualities, while contingent services are high in credence qualities. These characteristics of service performances also suggest that service should be located somewhere between restaurant meals and legal services. Thus, service should be highly differentiable.

Focusing on Customer:

What is the purpose of a business? Every time I ask this question during a business seminar, the immediate answer that I get back is, “To make a profit.” But this answer is wrong.

(1) The Real Purpose of a Business:

The purpose of a business is to create and keep a customer. If a business successfully creates and keeps customers in a cost-effective way, it will make a profit while continuing to survive and thrive.

If, for any reason, a business fails to attract or sustain a sufficient number of customers, it will experience losses. Too many losses will lead to the demise of the enterprise.

(2) Why Businesses Fail?

According to Dun and Bradstreet, the single, most important reason for the failure of businesses in America is lack of sales. And, of course, this refers to re-sales as well as initial sales.

So your company’s job is to create and keep a customer, and your job is exactly the same. Remember, no matter what your official title is, you are a salesperson for yourself and your company. And the best way to increase your value as a salesperson is to build your customer base.

(3) Why Businesses Succeed?

The two most important words to keep in mind in developing a successful customer base are ‘Positioning’ and ‘Differentiation’.

Positioning refers to the way your customers think and talk about you and your company when you are not there. The position that you hold in the customer’s mind determines all of his reactions and interactions with you.

Your position determines whether or not your customer buys, whether he buys again and whether he refers others to you. Everything that you do with regard to your customer affects the way your customer thinks about you.

(4) The Key to Competitive Advantage:

Differentiation refers to your ability to separate yourself and your product or service from that of your competitors. And it is the key to building and maintaining a competitive advantage.

This is the advantage that you and your company have over your competitors in the same marketplace – the unique and special benefits that no one else can give your customer.

(5) Select Your Customers Carefully:

When you begin to think about acquiring and keeping customers stay for life, you need to think about the particular types of customers for whom your competitive advantage is so important that they would be poorly served by using anyone else’s product.

You need then to emphasize again and again that the special features and benefits you offer to them are so important that they should not even think of going somewhere else. If, for any reason, you fail to do so, you may lose the customer and all the work you’ve done in building that relationship in the first place.

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Importance of Services Marketing:

The importance of service sector has increased dramatically over the last decade, globally, where it now accounts for nearly two-thirds of the economy by income and jobs.

Deregulation of services, growing competition, fluctuations in demand, and the application of new technologies are presenting a considerable challenge to service sectors. Banks, insurance companies, airlines, telecommunication companies, as well as professional service firms; such as accountants and lawyers etc., need new approaches to meet the challenges.

Service marketing is of great importance to the growth of marketing in Asia. Over the last decade, there has been an increasing amount of literature devoted to the topic of services marketing in an Asian setting. We have chosen six themes to reflect important areas of academic research in services marketing.

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Implications and Opportunities for Service Marketers:

When Pavlov trained his lab dogs to salivate on command of a ringing bell, he inadvertently set the stage for over a century’s worth of conditioning-based consumer messaging. In the early decades of the 20th century, characters such as J. B. Watson and Edward Bernays “proved” that when businesses rang the right bell the right number of times, they could conjure desire and action in their audience through branding alone.

Even fifty years ago, media outlets were inherently limited by geography and scope. Because consumers lacked broad exposure to alternative experiences, need-based behavioural marketing held sway.

Indeed, response in the baby boom-era-folks really did buy the most heavily marketed goods and services – seemed to prove that customers could be conditioned to salivate on command.

Yet the close of the 20th century has been a boiling point for media fragmentation. The advent of the Internet and wireless technologies gave everyone access to information anytime and anywhere.

The glaring of media placed an unprecedented amount of information in the hands of customers, rendering geographic barriers moot. Most importantly, this sea change empowered customers to focus on what’s relevant to them and ignore the rest.

The consequence to marketers has been frustrating and confusing. As media fragments, so does the “mass” in mass-marketing. What’s a marketer, a sales manager, an entrepreneur, a CEO to do?

(1) Emerging Media, Branding and Customer Experience:

The emerging media market is shattering behaviourist marketing assumptions. Businesses are no longer in control of the strings; they can neither evoke desire nor elicit responses like they used to.

The window emerging media reveals a personal experience economy in which customers are in control and brand is defined in their minds by the experience itself. And those customers behave more like cats – notoriously self-motivated and generally not biddable – than like Pavlov’s dogs.

In today’s increasingly fragmented, always-on media landscape, customers are no longer passive. They voluntarily participate in every exchange and overlook messages that don’t interest them.

Online and wireless technologies are becoming the glue that binds these customers, offering new ways to communicate and new avenues for researching their buying needs.

The exponential development in search marketing and consumer-generated media demonstrates the powerful roles customers have in shaping the nature of voluntary engagement – in both business-to-business and business-to-consumer markets.

(2) New Challenges to Marketers:

Interactivity has changed the nature of marketing by extending its reach into the more intimate world of sales and customer relations. Marketers increasingly are required to go beyond their traditional roles of raising awareness and driving traffic; they must now create powerful persuasive systems that anticipate and model customer needs, personalize information and processes to meet those needs, and then measure the return on investment for every discrete process in that system.

The best companies have always listened to their customers. However, simply listening is no longer sufficient. All too often, the customer doesn’t even know the true complexity of what technology makes possible. Businesses may think of themselves as multi-channel, but in customers’ minds, channels are irrelevant and non-existent.

In the past, marketers presented the view they wanted customers to see; today the customer is choosing the angle from which they want to view the product. These angles of engagement reflect different motivations and different buying modes, and occur at different stages in the buying decision process.

Marketers are not accustomed to accounting for the angle, from which the customer frames the want or need. However, the growing abundance of alternative information resources provides customers with multiple avenues for researching products or services. Marketers are not in control of this information, but they must anticipate the implications of its availability and incorporate that understanding into the persuasive system.

Information has become the packaging for every product and service. Marketers may design intentional communications suited to their goals, but those communications all too often miss the mark of customer relevance.

(3) Beyond Personauzation – Persuasion Architecture’s “Persona”-Lization:

How customers frame their wants and needs in their various modes of information-gathering and decision-making defeat superficial attempts at personalization. So how do marketers function in a “pull” marketing environment where pin-point relevance and context are no longer optional?

Persuasion Architecture identifies audience segments based on demographics, psychographics and business topologies. It then allows management to set goals and objectives for segments based on an understanding of what drives and motivate each segment. This gives marketers the opportunity to market to customer segments in terms that are meaningful to customers.

“Persona”-lization, the centrepiece of the methodology behind Persuasion Architecture, allows businesses to unify their marketing messages, shape their merchandising, communicate with manu­facturers and suppliers, train call centre and in-store staff, and, ultimately, choose which products to carry and wrap services around.

Marketers will be most effective in a post-mass-market environment when they model interactivity based on personas. These archetypes represent audience segments in various buying modes. Personas allow businesses to empathize with and speak to customers’ needs across all communication channels.

By aligning the selling process to the customers’ buying processes, Persuasion Architecture makes it possible for businesses to integrate their multiple channels of influence, strengthening the coherence of both their message and their brand.

Marketing, media, advertising and communication professionals, as well as management, entrepreneurs and business owners will discover that applying the principles of Persuasion Architecture leads to increased customer sales, increased customer retention and expanded word of mouth marketing. In addition, Persuasion Architecture makes it possible for businesses to measure and optimize every piece of the system effectively.

The most challenging problem facing business today is planning and optimizing complex persuasive systems. While technological possibilities for managing the dynamic of human exchange are evolving rapidly and changing the landscape of marketplaces, the nature of the “human operating system” remains unaltered — the road may have changed, but those travelling on the road haven’t. Customers are not, and have never been, the metaphoric equivalent of Pavlov’s dogs.