Fundamentals of Services Marketing

Service: Any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Characteristics: Intangibility and Inseparability (produced and consumed simultaneously).

The Triangle connects three entities (Company, Employees, Customers) via 3 types of marketing:

1. External Marketing: Making the promise (Company $\to$ Customers).
2. Interactive Marketing: Delivering the promise (Employees $\to$ Customers).
3. Internal Marketing: Enabling the promise through training (Company $\to$ Employees).

The 7 Ps:

1. Product, 2. Price, 3. Place, 4. Promotion (Traditional 4 Ps) +
2. People (frontline staff), 6. Process (service delivery flow), 7. Physical Evidence (ambient environment, tangibles).

Concept: A standardized service quality measurement instrument developed by Parasuraman, Zeithaml, and Berry evaluating gap between expectations and perceived performance across 5 dimensions: RATER (Reliability, Assurance, Tangibles, Empathy, Responsiveness).

Concept: Services cannot be stored, saved, or inventoried for future use. An unsold hotel room or empty airline seat tonight represents lost revenue forever.

Concept: The physical environment in which the service is delivered and where the firm and customer interact, including architecture, lighting, decor, uniforms, and branded stationery (Servicescape).

Concept: A detailed operational flowchart mapping the entire service delivery process, visually separating customer actions, on-stage frontline staff actions, back-stage actions, and support processes across the Line of Visibility.

Concept: The situation where a customer whose service problem was handled quickly and superbly ends up more satisfied and loyal than if no problem had ever occurred.

Concept: Dynamic pricing technique used in capacity-constrained service industries (airlines, hotels) allocating the right service capacity to the right customer at the right time and price to maximize total revenue.

Emerging Sectors: Information Technology & Software Development (BPO/outsourcing) and Adventure Tourism/Hospitality.

The 5 RATER Dimensions:

1. Reliability: Ability to perform the promised service dependably and accurately (on-time flights, error-free bank statements).
2. Assurance: Knowledge, competence, and courtesy of employees and their ability to convey trust and confidence.
3. Tangibles: Physical facilities, modern equipment, professional employee appearance, and clean premises.
4. Empathy: Caring, individualized attention given to customers, understanding specific personal needs.
5. Responsiveness: Willingness to help customers and provide prompt, enthusiastic service.

The 5 Quality Gaps:

• Gap 1 (Management Perception Gap): Difference between customer expectations and management’s understanding of those expectations.
• Gap 2 (Service Standards Gap): Difference between management understanding and actual service design/specifications.
• Gap 3 (Service Delivery Gap): Difference between service specifications and actual service delivered by staff.
• Gap 4 (Communication Gap): Difference between service delivered and what was promised via external advertising.
• Gap 5 (Expected vs Perceived Service Gap): The cumulative customer gap: Perceived Service minus Expected Service.

1. People in Services: Frontline staff represent the brand directly; employee attitude, skill, and appearance directly shape perceived quality. 2. Internal Marketing: Treating employees as internal customers. Involves selective hiring, comprehensive training, empowerment, and rewarding customer-oriented behavior to enable staff to deliver service excellence.

Servicescape Dimensions (Bitner’s Model):

1. Ambient Conditions: Lighting, temperature, background music, scent, and noise levels affecting mood.
2. Spatial Layout & Functionality: Arrangement of furniture, checkout counters, ease of customer navigation.
3. Signs, Symbols & Artifacts: Directional signage, company branding, certifications displayed on walls.

• Impact: Influences employee satisfaction, customer stay duration, and perceived brand prestige.

Strategies when Demand Exceeds Capacity:

• Increase capacity: Hire temporary staff, cross-train employees, expand operating hours.
• Shift demand: Offer off-peak pricing discounts, encourage self-service online. Strategies when Capacity Exceeds Demand:
• Stimulate demand: Promotional discounts, special weekend packages, host events.
• Train staff or perform scheduled maintenance during slack periods.

1. Opportunities: Unique natural trekking destinations, cultural heritage sites, adventure sports (rafting, paragliding), luxury eco-resorts. 2. Challenges: Inadequate aviation connectivity, seasonality of tourism arrivals, poor highway infrastructure, lack of standardized hospitality training in remote trails.

1. Components of Service Blueprint:

• Physical Evidence: Hotel exterior, lobby, signage, registration card, keycard.
• Customer Actions: Arrives at hotel $\to$ approaches front desk $\to$ fills registration $\to$ receives key $\to$ goes to room.
• LINE OF INTERACTION
• On-Stage Frontline Contact: Doorman welcomes guest $\to$ receptionist verifies booking, issues keycard, explains hotel amenities.
• LINE OF VISIBILITY
• Back-Stage Contact: Housekeeping updates room availability status on software $\to$ baggage handler takes luggage via service elevator.
• LINE OF INTERNAL INTERACTION
• Support Processes: Central Reservation System (CRS) validates payment $\to$ credit card processor authorizes deposit $\to$ Property Management System (PMS) logs guest profile.

2. Benefits of Blueprinting: Identifies operational bottlenecks, fail points (Poka-Yoke), and service delivery wait times.

1. Differences from Goods Pricing: Harder to determine unit cost due to shared overhead and intangibility; customers rely on price as a primary signal of service quality.

2. Major Pricing Strategies:

• Differential / Dynamic Pricing: Charging different prices to different segments (student/senior citizen cinema tickets, peak vs. off-peak taxi fares).
• Service Bundling: Combining multiple related services at an attractive single price (e.g. hotel room + airport transfer + buffet breakfast).
• Yield Management: Algorithmic pricing adjusting seat/room rates dynamically based on demand elasticity and booking horizon to maximize revenue per available room (RevPAR) or available seat-kilometer.

1. Causes of Service Failure: Service core breakdown (delayed flight, cold food), employee unresponsiveness, billing errors.

2. Customer Complaining Behavior: Passive customers (leave silently, switch to competitor), Voice customers (complain constructively to firm), Irate customers (spread negative word-of-mouth and post bad online reviews).

3. Effective Service Guarantee:

• Unconditional: No fine-print loopholes.
• Easy to Understand & Communicate: Clear promise (e.g. ‘Pizza delivered in 30 minutes or it is free’).
• Meaningful: Compensation covers both cost and inconvenience.
• Easy to Invoke & Quick to Pay: Immediate payout without bureaucratic forms.
• Benefits: Forces organization to focus on quality and reduces customer perceived purchase risk.