June 5, 2014

Marketing Management for Service Firms

Marketing Management Revision Article Series

Marketing Strategies for Service Firms

In USA, service sector is becoming the dominant economic sector. Manufacturing share of jobs is also expected to go down to 8%. Hence service companies are important and their marketing activities are important for marketing professionals.

Services have four distinctive characteristics that determine the design of marketing activities or programs related to services. They are: intangibility, inseparability, variability, and perishability.

Services firms require attention additional 3Ps according to Booms and Bitner. The additional 3Ps are people, physical evidence and process.

The marketing department or function has a say and a view on these additional Ps.

In a service business companies employees are in direct contact with the customer and hence their behavior with the customer has an influence on customer satisfaction. Ideally employees should exhibit competence, a caring attitude, responsiveness, initiative, problem solving ability, and goodwill. So they have to be trained to exhibit appropriate behavior. The employees must have authority to solve problems that arise in service encounters without much delay and contacting various levels of supervisors. This is empowerment of service employees.

The physical facilities are important because customers come there and have the service. Hence the design and maintenance of the facility becomes a marketing issue.

The processes used to deliver the services are marketing issues. If the customer does not like the process he will not come back. Hence market research has to find out the customer’s likes and dislikes about the processes.

Hence the idea that service marketing requires internal marketing or involvement of marketing function in internal aspects of the company or the firm emerged. Internal marketing describes the work done by the company and marketing department to convey the needs of the potential customers to the service employees and the effort to train them and motivate them to provide exceptional service to customers.

Another concept in services marketing is interactive marketing. It refers to the skill of employees to interact with the client in serving the client. Clients judge services by technical quality as well as the interaction quality. Whether the surgeon has done the operation properly or not is the technical quality. Whether he has shown concern and inspired confidence or not is interaction quality. Service providers must provide high touch along with high tech.

In 9th Edition, Kotler mentioned that three areas are important in services marketing: managing the differentiation, managing the service quality and managing the productivity or service systems. In the 13th edition also all the three are discussed. But discussion related to productivity was reduced to a paragraph.

Managing the Differentiation

What are sources for differentiating in service businesses?

Service offer: while the core service could be the primary service package, a firm can come out with secondary service features that provide differentiation. We always have to remember that an additional feature added to a product must be valued by the customer and has to be profitable to the company. Hence marketers are involved to find those features which are valued by the customers and operations or process specialists are involved to deliver the feature at a cost that is profitable to the company.

Delivery: Reliability in service can be differentiating feature. Many firms find it difficulty to provide reliability.

Image: Developing an image that inspires trust is a differentiating feature.

Developing Brand Strategies for Services

Service use decisions are done away from actual service locations (customer come to a service facility after deciding to have service). Hence brand recall is essential or critically important for a customer to arrive at the location itself. So easy to remember brand names have to be used. Apart from name, other brand elements like logos, symbols, slogans also help in building brand awareness and brand image.

Because, service is not a physical product, physical facility of the service provider become a tangible facility associated with the service. Brand personality becomes important in services. A brand portfolio and hierarchy are required to position various services catering to different segments of the market.

Managing Service Quality

Quality is a differentiator. Parasuraman, Zeithaml, and Berry formulated a service-quality model that highlights the main requirements for delivering high service quality.

They identified possible five gaps that result in poor service.

1. Gap between consumer expectation and management perception

2. Gap between management perception and service quality specification

3. Gap between service quality specification and service delivery

4. Gap between service deliver and external communication

5. Gap between perceived service and expected service

The same researchers identified five determinants of service quality.

According to the order of preference of the variables is:

1. Reliability

2. Responsiveness

3. Assurance

4. Empathy

5. Tangibles


Philip Kotler, Marketing Management (Main text for revision and article)

Article originally posted in

Updated 5 June 2014, 3 Dec 2011


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