Definition of services marketing

People use an array of services everyday, although some - like talking on the phone, using a credit card, taking a bus ride, or withdrawing money from an ATM - may be so routine that you hardly notice them unless something goes wrong.

Other service purchases may involve more forethought and may be more memorable - for instance, booking a cruise vacation, getting financial advice, or having a medical examination. Your use of these services is an example of service consumption at the individual, or business-to-consumer (B2C), level.

Organisations also use a wide array of business-to-business (B2B) services, varying to some degree according to the nature of their industry, but usually involving purchases of a much larger scale than those made by individuals or families. Nowadays, firms are outsourcing more and more tasks to external service providers in order to focus on their core business.

What are services? The formal definition is services are an economic activity offered by one party to another, most commonly employing time-based performances to bring about desired results in recipients themselves or in objects or other assets for which purchasers have responsibility.  Time-based means something the firm does, which is within a certain time period.  Desired results are outcomes desired by the customer.  For example, you go to a theatre to be entertained and to a university to get an education.  These are the desired results.

In exchange for their money, time and effort, service customers expect to obtain value from access to goods, labour, professional skills, facilities, networks and systems.  However, they do not normally take ownership of any of the physical elements involved (Lovelock and Wirtz 2011).

What is so special about services marketing?  Services marketing focuses on the distinctive characteristics of services and how they affect both customer behaviour and marketing strategy.  For example, many services are produced and delivered with the customer present at the service firm’s facility.

The presence of the customer in the service facility means that capacity management becomes an important driver of the firm’s profitability. For example, if too few customers are present, the high fixed costs of operating and staffing the facility cannot be covered, and if too many customers show up, their service experience often deteriorates and customers who have to be turned away may not want to come back.

To address this constant struggle of having the right number of customers show up, pricing of services tends to be highly dynamic and complicated – think of the pricing of airline tickets and all the terms and conditions attached to a discounted ticket. Prices change all the time, and typically dependent on when you travel, how long in advance you make your booking, how long you stay at the destination, whether the ticket is flexible and allows for changes in travel dates and itinerary, and whether it is refundable. Such pricing is also called revenue management or yield management.

In services marketing, the traditional 4Ps of the marketing mix (product, pricing, promotion/market communications, place/distribution) are adapted to the distinctive features of services.  Then, there are the 3 additional Ps of services marketing: people, physical evidence and process.

The process of service delivery is often as important as the function of the service.  A service is a process from the organisation’s point of view, but an experience from the customers perspective. The quality of the experience is a function of the careful design of customer service processes, adoption of standardised procedures, rigorous management of service quality, high standards of training and automation. Services marketing helps to ensure that these processes are designed from the customer’s perspective.

Physical environment includes the appearance of buildings, landscaping, interior furnishing, equipment, uniforms, signs, printed materials and other visible cues that provide evidence of service quality and guide customers through the service process. The design on the physical environment can have a profound impact on customer satisfaction and service productivity.

People refer to the frontline employees of the firm. From a customer’s point of view, when service employees are involved, the people are the service. This means that frontline employees need to possess the required technical and interpersonal skills and a positive attitude.  People can be a key competitive advantage for many service firms.

Services marketing includes building customer loyalty, managing relationships, complaint handling, improving service quality and productivity of service operations, and how to become a service leader in your industry.

Example

Imagine you want to open a new restaurant.  Services marketing would then guide you on how to develop the 7Ps including the:

  • Core product: What is your value proposition? What sort of dining experience you wish to deliver, for example, one that is ideal for romantic fine-dining or business lunches?
  • Pricing: What price levels and menu designs you want to offer such as lower priced off-peak menu?
  • Promotion/market communications: How to reach your target audience and shape their visitation behaviour?
  • Place: Where do you locate your restaurant?
  • People: How do you select, train, motivate and retain your front-line employees?
  • Physical evidence: What will the interior of the restaurant look like?
  • Process: How do you design service processes to satisfy customers? This can range from seating to preparing the bill?

Services marketing would also help guide your thinking about how to develop long-term profitable relationships with your customers, design complaint handling and service recovery processes and policies, help you to systematically improve the quality of your service and the productivity of the entire operations. [1]

References
Lovelock, Christopher and Wirtz, Jochen (2011), Services Marketing: People, Technology, Strategy, Upper Saddle River, New Jersey: Prentice Hall.