This document discusses service marketing and managing the marketing mix for services. It covers key differences between products and services, characteristics of services like intangibility, inseparability, perishability and heterogeneity. It also discusses the expanded service marketing mix (7Ps) which includes product, price, place, promotion, people, process and physical evidence. The challenges of service quality management and setting customer-defined standards are also summarized.

1. Managing the Marketing Mix
Lecture 7
Extending the Marketing Mix: Service Marketing
Dr. Martin J. Liu
Lecturer in Marketing
Martin.Liu@Nottingham.edu.cn

2. Objectives
Learning • Explore potential differences between products and
Objectives services
The Difference • Describe the elements and sub elements of the service
between Product and extension to the marketing mix
Service
• Discuss the challenges services pose for marketing
Characteristics of
Service
Service Marketing
Mix

3. The Products-Services Continuum
Learning Objectives
The Difference
between
Product and
Service
Characteristics of
Service
Service Marketing
Mix

4. What is Service Marketing
Learning Objectives
• Examples: Defense, Postal, Education, health, Religious
Services, Hospitals, Airlines, Hotels, Law Firms,
The Difference Entertainment, etc.
between
Product and
• Definition: Activity or benefit that one party can offer to
Service
another that is essentially intangible and does not result in
the ownership of anything. Its production may or may not
Characteristics of be tied to a physical product
Service
Service Marketing
Mix

5. The Nature of Service
Learning Objectives
• Regardless of the “product”, there is a services component to the
offerings of all firms
The Difference
• In some cases, a service is the principal purpose of the transaction,
between as in the rental of a car, a haircut, or legal services -- we refer to
Product and this as the core service
Service
• In others, service is performed in support of the sale of a tangible
Characteristics of product -- these are referred to as supplementary services
Service
Service Marketing
Mix

6. Differences between
Products and Services
Learning Objectives
• Customers do not obtain ownership of the intangible element of
the service product (i.e. service personnel and their performance
cannot be ‘owned’ by the customer).
The Difference
between
Product and
• Intangible elements dominate value creation
Service
Characteristics of
• There is greater involvement of customers in the production
Service process (i.e. customers are part of the performance, they interact
with the service provider).
Service Marketing
Mix
• It is more difficult to maintain quality standards of service products
(i.e. individuals’ behaviour is hard to control and standardise).

7. Differences between
Products and Services
Learning Objectives • Many services are difficult for customers to evaluate (i.e. there
may be elements of personal taste, experience, ability and mood
that affect customers’ evaluation).
The Difference
between • Absence of inventories for services (i.e. no use for unsold stock,
Product and difficult to deal with sudden increases in demand).
Service
• Importance of time factor (i.e. many services are delivered in real
Characteristics of time so the consumer and provider must be together for the
Service service to occur).
Service Marketing • Delivery systems may involve both electronic and physical
Mix channels (i.e. different needs for staff behaviour management).

8. Differences between
Products and Services
Learning Objectives Physical goods Services
tangible intangible
The Difference homogeneous heterogeneous
between
Product and Production and distribution are Production, distribution and
Service separated from consumption consumption are simultaneous
processes
A thing An activity or process
Characteristics of
Service Core value processed in Core value produced in the
factory buyer-seller interaction
Service Marketing
Mix
Customers do not participate in Customers participate in
the production process production
Can be kept in stock Cannot be kept in stock
Transfer of ownership No transfer of ownership

9. Characteristics of Services
Learning Objectives
• Intangibility: difficult to sample and to evaluate
Intangibility
The Difference • Inseparability: difficult to separate services from the service
between Product and provider; mainly direct sales; staff are essential to the
Service delivery of quality services
• Perishability: those not sold can not be stored
Characteristics
of Service
• Heterogeneity: virtually every service is different; very
Heterogeneity
difficult to standardize quality
Service Marketing
Mix

10. (1) Intangibility “Hurdles”
Learning Objectives
• Inability to physically possess
• Difficult to evaluate (provide guarantees)
The Difference
between Product and • Difficult to advertise (use personal selling)
Service • Difficult to price
• Difficult to patent
Characteristics • Difficult to distribute (promote availability)
of Service • Difficult to store (offer a trial basis)
Service Marketing
Mix
Develop a marketing mix to provide
tangible (symbolic) cues : ex. Uniforms

11. (2) Inseparability
Learning Objectives
Being produced and consumed simultaneously
• The provider of the service is inseparable in the delivery
The Difference process
between Product and
Service • Customers participate in and affect the transaction Cannot
be mass produced
Characteristics
• Difficult to distribute, Mass Production is difficult
of Service • Services cannot be returned or resold
Service Marketing
Mix
Very Difficult to Balance Supply and
Demand if time sensitive

12. (3) Perishability
Learning Objectives Service cannot be stored & used at a
future time
- A lost sale is lost revenue
The Difference
between Product and - Unused capacity is lost forever
Service
Use demand management strategies
such as
Characteristics - Peak pricing:
of Service
- Telephone call pricing
- Theater Tickets
Service Marketing
Mix
Example:
Airlines use reservation systems to
sell their service in advance (Yield
Management)

13. (4) Heterogeneity
Learning Objectives
Variability in the quality of service
• allows marketers to develop their service product to match
The Difference
between Product and
customer needs/wants
Service
• Service delivery and customer satisfaction depend on
Characteristics employee and customer actions
of Service
• Service quality is difficult to deliver & control
Service Marketing
Mix
Standardisation Customisation
Strategies Strategies
- Automate service -Health Club
Routines -Physician
-Automatic car wash

14. Key Characteristics of
An Effective Marketing Mix
Learning Objectives •The elements are not
independent of each other.
The Difference
between Product and
•The mix elements should be
Service well blended to form a
consistent theme
Characteristics •The marketing mix matches
of Service customer needs
•The marketing mix matches
Service Marketing
Mix corporate resources
•The marketing mix creates a
competitive advantage The marketing mix paradigm ( Borden,
1964, McCarthy, 1978)

15. Service Extended Marketing Mix
Learning Objectives
Intangibility
The Difference
between Product and
Product Service Extended
Service Marketing Marketing
Mix (4 Ps) Inseparability Mix (7 Ps)
Characteristics of
Service -Product -Product
-Price Inseparability -Price
-Place -Place
Service -Promotion -Promotion
Marketing Mix -People
Heterogeneity
-Process
-Physical
Evidence
Ownership

16. An Expanded Marketing Mix
for Services
Learning Objectives
The Difference
between Product and
Service Product
(Service)
People
Process
Characteristics of
Service Place &
Place Customers
Customers Price
Price
Time Customers
Service
Marketing Mix
Promotion
Physical Evidence

17. Process
Learning Objectives
The Difference
between Product and Nature Flexibility
Service Personal Contact
Automation
Procedure Technology
Characteristics of
Service Process Law
Service Involvement Customers
Channels
Marketing Mix Other Stakeholders
Feedback

18. Total Quality Management (TQM)
Learning Objectives
Total Quality Management (TQM) is an integrated
organizational approach in delighting customers (both
The Difference internal and external) by meeting their expectations all the
between Product and
Service
time through everyone involved within the organization
working on continuous improvement improvement in all
products/services/processes along with structured
Characteristics of methodology.
Service
Service
• Total involvement of all levels in the organization
Marketing Mix
• Quality conformance to agreed upon requirements
• Management best use of available resources to
achieve total quality

19. Total Quality Management (TQM)
TQM’s key principles are:
Learning Objectives
1. Commitment to quality
The Difference 2. Focus on customer satisfaction
between Product and
Service 3. Assessment of organizational culture
4. Empowerment of employees and teams
5. Measurement of quality efforts
Characteristics of
Service
Service
Marketing Mix
TQM

20. Process for Setting
Customer-Defined Standards
Learning Objectives 1. Identify existing or desired service encounter sequence
2. Translate customer expectations into behaviors/actions
2. Translate customer expectations into behaviors/actions
The Difference
between Product and
Service 3. Select behaviors/actions for standards
3. Select behaviors/actions for standards
Measure Measure
4. Set hard or soft standards
Characteristics of by by
Service audits or transacti
operating on-
Hard 5. Develop feedback mechanisms
5. Develop feedback mechanisms Soft
data based
surveys
Service 6. Establish measures and target levels
6. Establish measures and target levels
Marketing Mix
7. Track measures against standards
7. Track measures against standards
8. Provide feedback about performance to employees
8. Provide feedback about performance to employees
9. Update target levels and measures
9. Update target levels and measures

21. People
Learning Objectives
Corporate Value
Culture and Style
Organisation Power
The Difference Organisational Structure
between Product and
Service Legal
Recruitment
Individual Education / Training
Characteristics of
Personality / Attitude
Service Motivation / Value
People Suppliers Behaviour / Appearance
Reward System
Service Channels
Marketing Mix Other Customers
Customers Customer Interaction
Customer Involvement
Feedback Staff Appraisal
Attitude Surveys

22. Barriers To Customer Service
Learning Objectives
People Skills - Weak personality traits
(Moodiness, sullenness, laziness)
The Difference
between Product and Inadequate training
Service (Communication, grooming)
Insufficient authority
Characteristics of (Ineffective empowerment, too many rules, etc.)
Service
Service • Customers are viral and can damage a brand.
Marketing Mix • 90% of angry customers shared their story with a
friend.

23. Equal Employment Opportunity
Learning Objectives
• A organization must be able to prove:
– That its tests are related to success or failure on the job
The Difference (validity)
between Product and
Service
– That its tests don’t unfairly discriminate against minority or
nonminority subgroups (disparate impact).
Characteristics of
• EEO guidelines and laws apply to all selection devices, including
Service
interviews, applications, and references.
Service • Testing alternatives if a selection device has disparate impact:
Marketing Mix
– Institute a different, valid selection procedure that does not
have an adverse impact.
– Show that the test is valid—in other words, that it is a valid
predictor of performance on the job.
– Monitor the selection test to see if it has disparate impact.

24. Physical Evidence
Learning Objectives
The Difference
between Product and
Service Physical Evidence Environment
Tangible Clues
Characteristics of
Service
Facilitating Goods
Service
Marketing Mix Objective Feedback / Control

25. Elements of Physical Evidence
Learning Objectives
Servicescape Other tangibles
The Difference
between Product and Facility exterior Business cards
Service Stationery
Exterior design
Signage Billing statements
Characteristics of Parking Reports
Service Landscape Employee dress
Surrounding environment Uniforms
Brochures
Service Facility interior Web pages
Marketing Mix Interior design Virtual servicescape
Equipment
Signage
Layout
Air quality/temperature

26. Cause and Effect Chart
for Airline Departure Delays
Learning Objectives
Facilities, Front-Stage Procedures
Equipment Personnel
The Difference Delayed check-in procedure
Gate agents cannot
between Product and process passengers - Confused seat selection
Service Aircraft late to gate fast enough - Boarding pass problems
Arrive late - Late arrival - Too few agents Acceptance of late passengers
Oversize bags - Gate occupied - Agents undertrained - Cutoff too close to departure time
- Agents undermotivated
Bypass ticket counter - Mechanical Failures - Agents arrive late at gate
- Desire to protect late passengers
Characteristics of Customers
- Late Pushback Tug Late/unavailable - Desire to help company’s income
Service cockpit crews - Poor gate locations
Late/unavailable
cabin crews Delayed
Departures
Service
Late food service
Marketing Mix Late cabin cleaners
Other Causes Late baggage to
aircraft Poor announcement of
Weather departures
Late fuel
Air Traffic
Weight and balance sheet late
Materials, Backstage
Supplies Personnel

27. Seven Gaps Leading to
Customer Dissatisfaction
Learning Objectives
Customer needs
and expectations
The Difference 1. Knowledge Gap
between Product and
Management definition
Service
of these needs
MANAGEMENT
2. Standards Gap
Characteristics of Translation into
Service design/delivery specs
3. Delivery Gap
Service Execution of 4. Advertising and
design/delivery specs sales promises
Marketing Mix
5. Perceptions Gap 6. Interpretation Gap
Customer perceptions Customer interpretation
of product execution of communications
7. Service Gap
Customer experience
relative to expectations