MMPM-005

Marketing of Services
Indira Gandhi National Open University
School of Management Studies

Marketing of Services
COURSE DESIGN AND PREPARATION TEAM
Prof. K. Ravi Sankar Prof. Santosh Dhar Dr. V. Chandrashekhar*
Director, School of Dean, Faculty of Doctoral Mahindra Days Hotels &
Management Studies, Studies and Research Resorts, Bangalore
IGNOU, New Delhi Shri Vaishnav Vidyapeeth
Vishwavidyalaya, Prof. J.B. Nadda *
Prof. Ravi Shankar Indore Goa University, Goa
Indian Institute of Foreign
Trade Prof. Darshana R Dave Ms. Sudha Tewari*
New Delhi Dean, Faculty of Management, Parivar Seva Sansthan, New
Sardar Patel University, Delhi
Prof. A Vidhyadhar Reddy Vallabh Vidyanagar, Gujarat
Institute of Public Enterprise Prof. P.K. Sinha*
Hyderabad, Telangana Dr. Chetan Srivastava IIM, Bangalore
Associate Professor Prof. L.M. Johri*
Prof. Ajit Upadhyaya SOMS, University of
Director Faculty of Management
Hyderabad Studies
Prestige Institute of
Management Mr. Sanjeev Bhikchandani* University of Delhi
Dewas, M.P. Sanka Information Pvt. Ltd., Ms. Rekha Shetty*
New Delhi Apollo Hospitals, Madras
Prof. Rajeev Sijariya
ABV School of Management Dr. Rupa Chanda* Prof. Mohan Aggarwal*
and Entrepreneurship, IIM, Bangalore XLRI, Jamshedpur
JNU, New Delhi
Saurabh Jain, Prof. Rakesh Khurana*
Mr. Saurabh Khosla* School of Management Studies Pro-Vice Chancellor
Tulika Advertising Agency, IGNOU, New Delhi Indira Gandhi National
New Delhi Open University, New Delhi
Mr. Amrish Sehgal*
Mr. Arun Shankar* Prof. J.D. Singh*
Citi Bank, New Delhi Bhutan Tourism Dev. Corp. IMI, New Delhi
Bhutan
Prof. Rajat Kathuria* Mr. M. Venkateswaran*
IMI, New Delhi Mr. D. Ramdas* TCI, Hyderabad
Management Consultant, New
[Link] Kumar, Delhi Course Editor
School of Management
Ms. Malabika Shaw* Prof. Ravi Shankar
Studies,
IGNOU, New Delhi AIMA, New Delhi
Course Coordinator
Prof. Madhulika Kaushik Mr. Kamal Yadav* Prof. Rajeev Kumar Shukla,
Vice Chancellor SOMS, IGNOU, New Delhi School of Management
Usha Martin University, Studies
Ranchi, Jharkhand Mr. Pramod Batra* IGNOU, New Delhi
EHIRC, New Delhi
Dr. Tapan K. Panda*
IIM, Kozikode, Calicut

Acknowledgement
Parts of this course is adapted from the earlier MS-65: Marketing of Services course and the
persons marked with (*) were the original contributors and the profiles are as it was on the date of
initial print.

PRINT PRODUCTION
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Assistant Registrar
MPDD, IGNOU, New Delhi
September, 2022
© Indira Gandhi National Open University, 2022
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COURSE INTRODUCTION

Dear Learners,
The concept of “service” is quite broad and includes a wide range of services.
A service business is one in which the buyer’s perception of the value of the
offering is mostly dependent on the services rendered to him rather than the
products offered. Additionally, service quality is described as the delivery of
excellent or superior service relative to customer expectations. The service
sector has grown substantially in all the developed economies as well as
in India. The reasons for growth in service industries include increasing
affluence, more leisure time, greater life expectancy, increasing complexity
of life, etc. As a result of the growth of the service sector, challenges
affecting industries in this sector globally have received increased attention.
The distinctive characteristics of services necessitate distinct marketing
strategies for services. For the successful marketing of services, effective
management of the four Ps—product, price, place, and promotion—is
necessary but insufficient. This understanding led to the development of an
expanded marketing mix that now includes the three additional Ps—people,
physical evidence, and process. Interactive marketing, external marketing,
and internal marketing must be successfully implemented for a service to
be successful.
Digital transformation, and the widespread availability of new technologies,
is rapidly changing the way customers and companies interact. Omni-
channel customer service is a reality. Price comparison websites, peer review
platforms, and social media have increased the knowledge of today’s savvy
consumers regarding the best offers or the most appropriate products and
services for their needs. Increasing customer demand and rising competition
are challenges for service businesses. Marketers need to have a distinct
set of competencies in order to design, manage, and assess the processes
and performance that make up the service offering. The course is divided
into four blocks and has 14 units. Activities and project assignments to aid
application of the concepts of marketing of services have been specially
added to facilitate learning.
Learning Outcomes
After studying this course, you should be able to:
●● Explain the reasons for growth of the service sector.
●● Assess the distinct characteristics of services and their marketing
implications.
●● Examine the significance of the extended marketing mix for services.
●● Design service quality measurement tools to assess the efficacy and
efficiency of service offerings
●● Develop strategies for managing demand and capacity of services.
●● Appreciate the significance of customer relationships and customers
retention strategies for service businesses.
●● Appreciate the profound impact of technology on service.
●● Explore and visualize the emerging trends in the marketing of services.
 COURSE CONTENT

BLOCK 1 MARKETING OF SERVICES:

7
AN OVERVIEW
Unit 1 Marketing of Services: An Introduction 9
Conceptual Framework for Services
Unit 2 32
Marketing
Unit 3 Consumer Behaviour in Services 45
BLOCK 2 SERVICE MARKETING MIX 63
Unit 4 Product Decisions 65
Unit 5 Pricing Decisions 80
Unit 6 Place Decisions 93
Unit 7 Promotion Decisions 105
BLOCK 3 EXTENDED MARKETING MIX FOR
117
SERVICES
Unit 8 Managing People 119
Unit 9 Managing Physical Evidence 134
Unit 10 Managing Service Process 146
BLOCK 4 STRATEGIC ISSUES 167
Unit 11 Managing Service Quality 169
Unit 12 International Trade in Services 189
Unit 13 Managing Demand and Capacity 207
Unit 14 Emerging Issues in Marketing of Services 223
BLOCK 1 MARKETING OF SERVICES :
AN OVERVIEW

The first block of the course is concerned with the conceptual framework for
the marketing of services. The block consists of three units. The first unit,
entitled “Marketing of Services: An Introduction,” explains the concept
of service, reasons for the growth of the service sector, global trends in
services, and service sectors in India. The unit also gave a brief overview of
IT BPM services, tourism, financial services, telecommunication services,
healthcare services, ports, shipping and waterways services, the space
sector, and start-ups in services.
The second unit, “Conceptual Framework for Services Marketing,” explains
why marketing practises and applications need to be specifically evolved for
services, as they are, in certain characteristics, distinct from goods. The unit
deals with the characteristics, classification, and marketing mix of services.
The unit also discusses the service marketing triangle framework which
explains how three distinct types of marketing—interactive marketing,
external marketing, and internal marketing—must be successfully
implemented for a service to be successful. The unit ends with highlighting
the effects of technological innovation on service marketing.
The last unit of the block, “Consumer Behaviour in Services”, applies the basic
concepts of consumer behaviour to services marketing. The unit discusses
the impact of service characteristics on service buying and the marketing
implications of consumer expectation and perception for service buying.
The unit also discusses the recent trends that have impacted consumption
of services, including the impact of technology and the implications these
developments have for marketers and providers of services.

UNIT 1 MARKETING OF SERVICES: AN INTRODUCTION

UNIT 2 CONCEPTUAL FRAMEWORK FOR SERVICES MARKETING
UNIT 3 CONSUMER BEHAVIOUR IN SERVICES

7
UNIT 1 MARKETING OF SERVICES: AN
INTRODUCTION

Learning Outcomes
After studying this unit, you should be able to:
●● appreciate the concept of services
●● assess the reasons for growth of the service sector
●● explain the employment trends and how India is transforming to a
service-based economy.
●● understand global trends in services
●● analyse the specific service sectors in India
Structure
1.1 Introduction
1.2 The Concept of Service
1.3 Reasons for Growth of the Service Sector
1.4 Global Trends in Services
1.5 Service Sectors in India
1.6 An Overview of Specific Service Sectors
1.7 Summary
1.8 Keywords
1.9 Self- Assessment Questions
1.10 References and Further Readings

1.1 INTRODUCTION
Economists have divided all industrial and economic activities into three
main groups: primary, secondary, and tertiary. Primary activities include
agriculture, fishing and forestry. Secondary activities cover manufacturing
and construction; tertiary activities refer to the services and distribution.
In the pre-industrialised era, primary activities were the mainstay of the
economy. The Industrial Revolution marked the beginning of increasing
importance of secondary activities and the gradually decreasing the status
of agriculture and allied activities. The period following World War II saw
USA become the world’s first ‘service economy’ with more than 50 per cent
of the working population employed in producing services and today more
than 80 per cent of the US economy is service-oriented. This led a New
York Congressman to remark that America is becoming a nation of people
who are “serving each other hamburgers or taking in each other’s’ laundry”.
Presently, the majority of developed economies have already transitioned to
a service-based economy, and emerging economies such as India and China
are moving quickly in that direction. At the same time, the services sector
also significantly supports the expansion and growth of the manufacturing
9
Marketing of Services : An and agricultural sectors, as opposed to displacing them. For instance, the
Overview development of information and communication technology has greatly
improved productivity in the industrial and commercial sectors. For the
expansion and development of the manufacturing and agricultural sectors,
services provide the necessary infrastructure and assistance. Services
help improve productivity, make the best use of resources, make quality
managerial decisions, and more, all of which have an effect on a society’s
standard of living and economic growth. Deniel Bell, in his book ‘The
Coming of the Post-industrial Society’ called this period of dominance by
the service sector as the post-industrial society. According to him: “if an
industrial society is defined by the quantity of goods as marking a standard
of living, the post-industrial society is defined by the quality of life as
measured by the services desirable and possible for everyone.”

1.2 THE CONCEPT OF SERVICE

Widespread interest in the effective management and marketing of services
as well as the inconclusive debate on how distinct is the marketing of
intangible services from that of the tangible products, have enriched the
literature by highlighting the service characteristics as that of intangibility,
immediacy, individuality, perishability, heterogeneity, ownership,
inseparability of production from consumption, and being experimental. In
common parlance, these characteristics are also referred as:
●● Services are performed, not produced.
●● Services are people as well as technology-based.
●● Services supply cannot be easily changed to meet the suddenly
changed market needs.
●● Service demand has greater elasticity.
●● Services face unique quality control issues and a larger number of
problems in customer servicing.
●● Service quality is an amalgam of services.
Activity 1
If we take tangibility and intangibility as the opposite ends of a continuum,
can you by looking around identify services which can be classified along
this continuum? Think of the services utilized by you as an individual, as a
family and as an organisation.
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The term service is rather general in concept, and it includes a wide variety
of services. A list of selected services is shown in Table 1.1. There are the
business and professional services such as advertising, marketing research,
banking, insurance, computer-programming, legal and medical advice.
Then there are services which are provided by professionals but consumed
10
for reasons not of business, rather for leisure, recreation, entertainment and Marketing Of Services: An
fulfilment of other psychological and emotional needs such as education, Introduction
fine arts, etc.
Table 1.1: List of Selected Services
Utilities Insurance, Banking, Finance
Electricity Banks
Water Supply Share and Stock Brokers
Law Enforcing, Civil, Business, Professional and
Administrative and Defence Scientific Activities
Services Advertising
Police Marketing Research
Army Consultancy
Air Force Accountancy
Navy Legal
Judiciary Medical
Civil Administration Educational
Municipal Services Research
(Sewage, maintenance of roads Maintenance and Repairs (of
parks and public buildings plants, machinery and equipment)
Transport and Communication Leasing
Railways (Passenger and Freight) Computer Programming
Air Transport (Passenger and Employment Agencies
Freight)
Leisure, Recreation
Post and Telegraph
Cinema, Theatre
Telephone and Telecommunication
Broadcasting (All India Radio) Clubs, Gymnasiums
Telecasting (Doordarshan) Restaurants, Hotels
Distributive Trades Video Game Parlours
Wholesale Distribution Casinos
Retail Distribution Self-improvement Courses
Dealers, Agents Miscellaneous
Beauty Parlours
Health Clubs
Domestic Help
Dry Cleaning
Matrimonial Service
Source: Adapted from Donald Cowell, ‘The Marketing of Services’,
Heinemann, London
Faced with such a broad spectrum we need to define the concept of service
from a marketing view-point. Kolter offers one such definition: “A service
is any activity or benefit that one party can offer to another that is essentially
11
Marketing of Services : An intangible and does not result in the ownership of anything.” Its production
Overview may or may not be tied to physical product.
W.J. Stanton views services as fulfilling certain wants and states that,
“services are those separately identifiable, essentially intangible activities
which provide want-satisfaction, and are not necessarily tied to the sale of
a product or another service. To produce a service may or may not require
the use of tangible goods. However, when such use is required, there is
no transfer of title (permanent ownership) to these tangible goods.” As
in the case of a product, in the case of services also your starting point
for understanding the marketing dynamics is the want satisfaction of the
customers. It is important to correctly identify the particular want(s) which
your service is fulfilling, since this will provide the clue for designing the
most appropriate marketing strategy. Services are different from physical
goods. Table 1.2 covers some of the major differences between goods and
services.
Table 1.2 Differences between Goods and Services
Goods Services
The term “goods” refers to the The term “services” refers to the
tangible products that people are comforts, benefits, or facilities
willing to buy for a price. supplied by other individuals.

Goods are tangible, that is, they can Services are intangible, that is, they
be seen or touched. could not be seen or touched.

Ownership of the goods passes from

Service ownership is non-
seller to buyer; the moment buyer
transferable.
pays for it.
Evaluating services is challenging
Evaluating good is easy since the
since each service provider
quality standards are uniform.
approaches service differently.
Services cannot be returned or
Goods can be returned or replaced
exchanged once they have been
with the vendor.
performed.
The seller and the goods can be The services and providers are
distinguished. inextricably linked.
The goods’ physical attributes and
The services will never have the
specifications will always remain
same attributes.
the same.
Services are time-sensitive; if they
are not used within a specified
Goods can be stored for later use.
period of time, they cannot be
stored.
Goods are produced first, traded, Services are simultaneously
and then consumed. produced and used.

A restaurant provides satisfaction to its customers on the basis of type and

quality of its food, its decor and environment and the behaviour of its staff
and its location in a busy commercial-cum office complex. For instance,
12
‘Class Touch’ was started as a restaurant serving exclusive Western and Marketing Of Services: An
Chinese cuisine with an expensive decor, a live band, beautifully liveried Introduction
waiters and a high-price menu. The venture was a flop right from the start.
On the advice of its marketing consultant, the restaurant changed over
from serving elaborate, expensive meals to a ‘fast-food’ outlet providing
quick, reasonably priced meals for consumption both within and outside
the restaurant. Today this restaurant is a big success. It was the correct
identification of the want-satisfaction which helped the restaurant become
successful. Located in a predominantly office complex, the owners realised
that in lunch-break, people do not visit a restaurant for relaxation or status
satisfaction. They have limited time at their disposal and want a quick clean
meal at a reasonable price, with minimum frills and fancy. In this case, the
restaurant was satisfying the basic hunger need, but was catering to a very
specific class of customer (office-goers) with a special kind of constraint
(that of time and money).
To be successful, you have to firstly, identify the basic need which is being
fulfilled by your service, and secondly, find ways and means to differentiate
it from that of the competitors so that you can increase your number of
customers and also command their loyalty. In our earlier example of the
restaurant, it was only after the basic need had been correctly identified that
the restaurant could adopt an appropriate marketing strategy and turn the
corner. Thus, as a marketing manager involved in the marketing of services
your first concern should be the identification of the customers’ needs. A
clue to this can be provided by looking into the reason for the phenomenal
growth of the service sector in recent times.
Activity 2
Study an organisation engaged in Marketing of Education and Training
Services to describe:
i) The need or want that these services satisfy.
ii) The nature of services which these organisations are providing.
iii) How the services of these organisations are differentiated from those
of their competitors?
………………………………………………………………………
………………………………………………………………………
………………………………………………..………………………
………………………………………………………………………

1.3 REASONS FOR GROWTH OF THE SERVICE

SECTOR
Services are extensively used by people day to day in all aspects of life.
From education to entertainment, finance to fast food, travel to telephone,
advertisement to amusement parks, market research to maintenance services,
and retailing to recreation, and so on. Today services are increasingly being
used by corporate as well as household sector. The explosive growth in this
sector started in the 20th century, especially after the end of World War II.
Due to large scale destruction during the war lot of economic activities, had to
be carried out to bring the war torn economies back to strength. This resulted
in a number of new projects fuelling the demand for financial services.
13
Marketing of Services : An Manufacturing industries grew because they produced tangible goods which
Overview satisfied people’s physiological needs of food, shelter and clothing. As the
basic need was fulfilled there was demand for improved satisfaction, and
this led to a proliferation of variations of the same product and a number
of companies involved in its manufacture. The growth of service industries
can be traced to the economic development of society and the socio-culture
changes that have accompanied it. Today households as well as firms are
demanding more services as well as services of increasing quality and
sophistication. There are number of reasons for this growth in service sector.
Table 1.3 presents the reasons for growth of service industries.
Sometimes, the growth of a specific service industry is the result of a
combination of several reasons. Increasing affluence coupled with the desire
to utilise leisure time for leisure rather than for doing odd repair jobs in the
house had led to the growing tribe of plumbers and electricians. Increasing
affluence combined with increasing complexity of life and increasing
insecurity has led to the phenomenon of credit cards and travellers’ cheques
which have proved to be almost perfect substitutes for money. These
credit cards provide convenience and safety. Visits to bank branches have
significantly decreased as a result of online banking and mobile payment
apps. In fact, convenience is proving to be a key concept in the provision
of services.
Table 1.3: Reasons for Growth of Service Industries
Reasons Types of services required
1 Increasing affluence Greater demand for services
(activities which consumers used to
perform themselves) such as interior
decoration, laundry, care of
household products such as carpets,
care of garden etc.
2 More leisure time Greater demand for recreation and
entertainment facilities, travel
resorts, adult education and self-
improvement courses.
3 Higher percentage of women in Greater demand for crèches,
labour force babysitting, household domestic
help
4 Greater life expectancy Greater demand for nursing homes
and health care services
5 Greater Complexity of products Greater demand for skilled
specialists to provide maintenance
for complex products such as air
conditioners, cars, home computers.
6 Increasing complexity of life Greater demand for specialists
in income-tax, labour laws, legal
affairs, marriage counselling,
employment services.

14
 Marketing Of Services: An
7 Greater concerns about ecology Greater demand for purchased or Introduction
and resource scarcity leased services, car rental, travel,
resort to time sharing rather than
ownership basis.
8 Increasing number of new The computer-sparked development
products of such service industries as
programming, repair and time
sharing.
Source: Schoell, K.F. and J.T. Ivy, 1981 “Marketing : Contemporary
Concepts and Practices,“ Allyn and Bacon; Boston.
Activity 3
Describe any additional reasons you think contributed to the service
industries’ growth that are not listed in table 1.3.
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In addition to above mentioned factors, globalization has resulted in
growth of service sector as well. Globalization of economies has led to
an increased demand for communication, travel and information services.
This has been fuelled by the rapid changes brought by new information
technology. Globalization has also made increased and new demands on
legal and other professional services. Also, increased specialization has led
to greater reliance on specialist service providers at international level e.g.,
advertising and market research.
At times it is argued that growth in services is at the expense of manufacturing
sector of the economy. However, it is not true. In fact, services and
manufacturing are positively linked to each other. Micheal Porter in his
book, ‘The Competitive Advantage of Nations’ identified three distinct
links between manufacturing and services as explained below:
i) Buyer/supplier relationship: Many service industries have come
into existence through the de-integration of service activities by
manufacturing firms. An automobile manufacturer may outsource
number of service activities like transportation, warehousing,
marketing research, legal services, education and training of its
employees, information processing etc. Service industries depend a
lot on manufacturing firms for a significant share of their sales.
ii) Services tied to the sale of manufactured goods: Sale of a wide
variety of manufactured goods creates demand for associated services.
The sale of consumer durables requires ongoing need for servicing,
sale of computers leads to demand for training services and after sales
services, exports of any manufactured goods would require sale of
insurance, financial services and transportation services.
iii) Manufactured goods tied to the sale of services: This link is reverse
of the previous one. The sale of certain services leads to demand for
15
Marketing of Services : An manufactured goods, for example sale of engineering or management
Overview consulting from a nation can led to demand for equipment and other
associated manufactured goods from that nation. Also, provision of a
service requires a lot of manufactured goods.

1.4 GLOBAL TRENDS IN SERVICES

There has been a structural shift away from primary activities and
manufacturing toward services all over the world. In advanced economies,
services already accounted for 76% of GDP in 2015, up from 61% in 1980
(UNCTAD, 2017a). Figure 1.1 depicts the relative size of the service sector
in various large and small economies. Services account for 69% of GDP in
Japan and nearly 80% in the United States. In India, the service sector is
estimated to contribute 62 percent of GDP.
Figure 1.1 Estimated size of service sector in selected countries as a
percentage of GDP

Source: Wirtz and Lovelock (2022). Services Marketing: People, Technology,

Strategy, Ninth edition,
The services sector also accounts for the majority of the global
economy. According to Figure 1.2, the services share ranges from
49% in South Asia to 77% in North America. It accounts for roughly
two-thirds of global value-added. Apart from South, South and
Central Asia, it is thus higher than agriculture, industry, and natural resource
sectors combined in all other major geographical regions. This hints at the
enormous potential for increased trade in services to deliver significant
economic gains to the world.
16
Figure 1.2: Share of services in value-added, employment and cross- Marketing Of Services: An
border trade in services, by region Introduction

The growth in service sector output and employment has also been
accompanied by increased internationalization of service sector transactions,
driven by rapid advances in information and communication technology,
the growing presence of multinational corporations and outsourcing of
activities, and deregulation of services. According to the WTO, the value of
global commercial services trade grew sevenfold between 1980 and 1999,
from $ 358 billion in 1980 to US $ 933 billion in 1990 to $1.4 trillion in
2000, and US$ 13.3 trillion in 2017. Since 2005, trade in services has grown
by 5.4 percent per year on average, outpacing trade in goods by 4.6 percent
per year. Between 2005 and 2017, developing economies, excluding LDCs
(Least Developed Countries), increased their share of global trade by more
than ten percentage points, reaching US$ 3.4 trillion in global services
exports and US$ 4.5 trillion in global services imports (see Figure 1.3).
Figure 1.3: Developing economies share in world trade in commercial
services, 2005 and 2017

17
Marketing of Services : An
Overview 1.5 SERVICE SECTOR IN INDIA
The services sector in India includes a wide range of activities such as trade,
hotels and restaurants, transportation, storage and communication, financing,
insurance, real estate, business services, community, social, and personal
services, and construction services. The service industry is becoming more
significant to the Indian economy. In accordance with the global trend,
India’s services industry is expanding significantly and accounts for more
than half of the country’s GDP. The primary and secondary sectors are
supplied with the necessary facilities by the service sector.
The Service sector has contributed significantly to exports and provided
widespread employment. An assessment of the Indian economy’s growth
path over the last 16 years, from 2003 to 2019 (Table 1.4) reveals that
growth is primarily driven by the services sector, which has shown resilience
throughout the period, with the exception of 2008-09. From 2014 to 2019,
the services sector contributed 68.8 percent of GVA, industry contributed
25.1%, and agriculture contributed 6.1%. Agriculture, forestry, and fishing
growth is unpredictable due to reliance on monsoon, but an increasing share
of allied activities that are relatively insulated from weather uncertainties
has given the sector some resilience. As a result, agriculture has lost its
share of total GVA to the services sector. Manufacturing, on the other hand,
has driven industrial GVA and has broadly maintained its share, reflecting
its forward and backward linkages with other sectors.
Table 1.4: Sector-wise GVA Growth

Source: Annual Report 2018-19, Reserve Bank of India

India’s services sector Gross Value Added (GVA) increased at a CAGR of
11.43% to Rs. 101.47 trillion (US$ 1,439.48 billion) in FY20, from Rs.
68.81 trillion (US$ 1,005.30 billion) in FY16. Between FY16 and FY20,
financial, real estate and professional services augmented at a CAGR of
11.68% (in Rs. terms), while trade, hotels, transport, communication and
services related to broadcasting rose at a CAGR of 10.98% (in Rs. terms).
The services sector accounts for more than 50 per cent of the Gross State
Value Added (GSVA) in 12 out of the 33 states and UTs (Table 1.5).
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Chandigarh stands out with a particularly high share of services in GSVA Marketing Of Services: An
at 73.47 per cent while Sikkim’s share remains the lowest at 21.82 per cent. Introduction
Notably, Services share in Sikkim’s GSVA has increased from over 18 per
cent in 2018-19 to over 21 per cent in 2019-20. Similarly, over the last
two years, share of services in GSVA has increased by over 2 per cent for
Himachal Pradesh and Odisha.
Table 1.5: Services Sector Performance at the State and UT Level

Source: Handbook of Statistics on Indian States, RBI.

1.5.1 Employment in Service Sector
Figures 1.4 shows clearly that over time, employment is rising in the service
sector while falling in the agricultural sector. In 2020, about 33 percent
of all jobs were in the service industry, up from just over 26 percent in
2010. Less than 42% of workers were employed in the agriculture sector
in 2020, down from more than 52% in 2010. However, compared to other
countries’ experiences, India’s employment share of services (33%) is
19
Marketing of Services : An significantly lower than its GVA share of services (54%). The fact that the
Overview service sector has not been able to generate enough jobs relative to its size
shows that its recent expansion, particularly in the formal sector, hasn’t been
successful in creating enough employment. This suggests that, compared to
other countries, the services sector has a very high potential to generate
employment in the coming years.
Figure 1.4 Employment in Service Sector and Agriculture Sector
(% of Total Employment)

Source: World Bank Development Indicators

1.5.2 FDI Inflows Into Services Sector
The largest receiver of FDI inflows in India is the services sector. India
moved up four spots from ninth place in 2019 to claim the fifth-largest share
of foreign direct investment (FDI) in 2020, according to the UN Conference
on Trade and Development’s (UNCTAD) World Investment Report 2021.
India received the largest annual FDI inflows of US$ 81.97 billion in 2020–
21. Inflows of foreign direct investment into the country were US$43.12
billion in the first half of 2021–22. During the period of April through
September 2021, FDI equity inflows, which are calculated as FDI inflows
less reinvested earnings, totalled US$ 31.15 billion, an increase of 3.8%
from the same time last year.
Table 1.6 exhibits that services sector received US$ 16.73 billion in FDI
equity inflows during 2021–22 (April to September). Compared to the FDI
equity inflows into services over the same period previous year, this is down
more than 29%. The subsector of Computer Software & Hardware was
responsible for this decline. The “Computer Software & Hardware” sub-
sector saw FDI equity inflows of US$17.55 billion in first half of 2020–21.
It has decreased by $10 billion to US$ 7.12 billion in the first half of 2021–
2022. However, this still represents an increase of 77% above the FDI equity
inflows into this sub-sector during first half of 2019–20. As contrast to this,

20
the subsectors of “Financial, Business, Outsourcing, R&D, Courier, Tech Marketing Of Services: An
Introduction
Testing & Analysis” and “Education” saw significant inflows of US$ 3.16
billion and US$ 2.25 billion, respectively, from April to September 2021.
Nearly 50% of all FDI equity inflows into India during this time period were
directed to the services sector.
Table 1.6: Gross FDI Equity Inflows into Services Sector

Source: Department for Promotion of Industry and Internal Trade (DPIIT).

*: Up to September 2021

21
Marketing of Services : An 1.5.3 Services Export
Overview
India is one of the world’s leading exporter of services (Figure 1.5). With an
increase in its percentage of global commercial services exports from 3.4%
to 4.1%, it remained one of the top ten service exporting nations in 2020.

Figure 1.5: India’s share in World Commercial Service Exports

Source: World Bank Note: (Commercial service exports are total service
exports minus exports of government services not included elsewhere.
International transactions in services are defined by the IMF’s Balance of
Payments Manual (1993) as the economic output of intangible commodities
that may be produced, transferred, and consumed at the same time.)

1.6 AN OVERVIEW OF SPECIFIC SERVICE

SECTORS
The fact that the service sector now accounts for more than half the GDP
probably marks a watershed in the evolution of the Indian economy. India’s
high capabilities in Information Technology, and its booming IT software
exports are well known. India’s health services, manned by highly qualified
and experienced personnel, super-specialty hospitals specializing in both
modern and traditional Indian medical systems like Ayurveda, Unani, and
nature- cure supported by state-of-the-art equipment, are attracting patients
from across the world, and constitute a significant segment of India’s
services sector.
Education is another field which is not only a huge segment of the services
sector within the country, but also a foreign exchange earner by way of NRIs
and foreign students enrolled in major medical, technological and other
institutions in India, and also export of manpower even to the western world.
The entertainment industry, particularly films and TV, which happen to be
among the fastest growing in the world. Indian films are popular across
West Asia, Afghanistan, Central Asia, Russia and in South East Asia and are
now penetrating the Western world.
India, the second largest scientific and technical manpower in the world, has
been providing varied consultancy and other services to the world. There is
immense scope for India to undertake project and management consultancy,
repair and maintenance work pre-publishing services, and R&D in various
disciplines, and interested parties from across the world are welcome to tap
these and other capabilities available in abundance in the country.
22
The tourism industry in the country is well equipped, and also fast growing Marketing Of Services: An
to offer tourists with diverse interests and means, all the services needed to Introduction
make their visit memorable. India, as a subcontinent with varied geographical,
climatic, ethnic, cultural, religious and social strands intertwined, India is
a one-stop destination for any tourist wanting a kaleidoscopic experience
of life in its entirety. Tourism sector is a major contributor to GDP growth,
foreign exchange earnings and employment.
1.6.1 IT BPM Services
One of India’s largest service sectors is the Information Technology-Business
Process Management (IT-BPM) industry. According to NASSCOM’s
provisional estimates, IT-BPM revenues (excluding e-commerce) reached
US$ 194 billion in 2020–21, increasing by 2.26 percent year over year and
hiring 1.38 lakh additional employees.
The major share (> 51%) of the IT-BPM sector is made up of IT services.
Over the past several years, its proportion has remained relatively stable. The
IT-BPM sector’s overall revenue increased by 2.1% in 2020–21 (excluding
hardware and e-commerce) (YoY). Exports account for a considerable
amount of this revenue. Export revenue increased by 1.93 percent to reach
US$ 149.1 billion in 2020–21. (Table 1.7).
Table 1.7: Exports and Domestic Market Size of Indian IT-BPM
Industry (excluding hardware & e-commerce)

Source: NASSCOM. (Note: E: Estimate.)

In 2020–21, the IT–BPM sector exported US$ 149.1 billion in goods and
services (excluding hardware and e-commerce), and BFSI was accounted for
US$ 61.4 billion of that total, or more than 41% of the exports. Contributions
from high-tech/telecom and manufacturing services totaled $26.3 billion
and $24.3 billion, respectively, for shares of 17.65 and 16.28%. Export
revenues increased somewhat in each of the three subsectors in 2020–21
year over year, with BFSI expanding by 3%, Hi-tech/Telecom services by
2%, and Manufacturing services by 1%.
Several policy efforts have been implemented during the past years to
promote innovation and technology adoption in the industry, including the
relaxation of Other Service Provider rules, Telecom Sector Reforms, and
Consumer Protection (e-commerce) Rules, 2020. This would greatly boost
the sector’s access to talent, stimulate the creation of more jobs, and propel
it to the next stage of development and innovation.
1.6.2 Telecommunication Services
Telecommunication sector has witnessed a total transformation throughout
the world in the last two decades due to rapid technological advances. Today,
23
Marketing of Services : An an advanced telecom system is a necessity for a nation’s manufacturing
Overview as well as service industries. With numerous new services/applications
including digital payments, Aadhar, e-governance, e-commerce, e-health,
e-education, and e-trade, the telecom sector has emerged as a major enabler
of Digital India. These applications, along with many other crucial service
industries like banking, health, and education, which support the nation’s
overall economic growth, are made possible by telecom services. With
the increased availability of smartphones at much more affordable prices,
the mobile phone has evolved beyond a simple communication tool, and
services are increasingly linked through mobile, the Internet, and other
digital modes of delivery.
At the end of the financial year 2020-21 the overall telecom subscriber base
reached 1201.20 million in comparison to the subscriber base of 1177.97
million as on 31 March, 2020 registering an increase of 23.23 million
subscribers during the financial year 2020-21. The overall subscriber base
and tele-density is depicted in Table 1.8.
Table-1.8: Overall Subscriber base and Tele-density

Source: https: //[Link]/sites/default/files/Annual Report_

06042022_0.pdf
The details of Internet and Broadband subscribers as reported by the service
providers in the country as on 31 March, 2021 are indicated in Table 1.9.
Table 1.9: Internet Subscribers

Source: [Link]
Report_06042022_0.pdf
24
1.6.3 Tourism Marketing Of Services: An
Introduction
The tourism industry is a significant driver of economic growth and makes
a considerable contribution to GDP, foreign exchange revenues, and
employment.
Along with public-private initiatives in the tourism sector, the government
has implemented a number of policy initiatives and steps to promote
health and medical tourism in India. India has been a popular destination
for medical tourism. The Ministry of Tourism has designated Medical and
Wellness Tourism, including Ayurveda, as a Niche Product in an effort to
combat the issue of “seasonality,” promote India as a 365-day destination,
and draw visitors with specific interests.
In order to improve the infrastructure for pilgrimage at a few key pilgrimage
places, the Ministry of Tourism established the “National Mission on
Pilgrimage Rejuvenation and Spiritual, Heritage Augmentation Drive”
(PRASHAD) in January 2015. The mission initially selected 41 places for
development spread over 25 states.
The Ministry of Tourism has designated 15 theme circuits for development
under the Swadesh Darshan Scheme, including the Himalayan Circuit, North
East Circuit, Krishna Circuit, Buddhist Circuit, Coastal Circuit, Desert
Circuit, Tribal Circuit, Eco Circuit, Wildlife Circuit, Rural Circuit, Spiritual
Circuit, Ramayana Circuit, Heritage Circuit, Tirthankar Circuit, and Sufi
Circuit. These circuits include all of the nation’s religious, spiritual, cultural,
natural, and tribal landmarks. According to the plan, the Ministry is creating
these theme circuits based on the integrated concepts of high tourism value,
competitiveness, and sustainability with the aim of enhancing the tourist
experience and employment prospects.
1.6.4 Financial Services
Financial services are well-known for promoting and sustaining economic
growth. Financial services include everything from payments and digital
banking to insurance and money management. Financial services have a
wide range of stakeholders and active players, including credit and debit card
issuers and processors, traditional banks, and competitors. With the opening
of the banking sector to foreign competition and the liberalized regulatory
norms followed by the RBI, the banks have been using technological advances
in every sphere of banking to increase their performance levels. With an
emphasis on retail finance and growing use of new technologies, Indian
banks have repositioned themselves as universal finance solution providers
with capabilities ranging from investment banking to project financing and
export financing on the corporate side, and from providing loans to selling
insurance and mutual funds on the retail side. Financial institutions and
start-ups are improving their technology and extending remote services as
financial activity becomes more computerised, particularly as individuals
choose to manage their finances from home.
The last few years have seen significant increase in financial transactions,
and there are now many options for making digital payments that are
expanding over time. According to transaction volume, Unified Payments
Interface (UPI) is currently the leading retail payment system in the nation,
25
Marketing of Services : An demonstrating its widespread acceptability (Figure 1.6 & 1.7). UPI processed
Overview 4.6 billion transactions totaling $8.26 lakh crore in December 2021. UPI’s
original goal was to replace cash from low value transactions. 50% of UPI
transactions, according to the NPCI’s detailed transaction statistics, were
for less than 200 rupees. The SEBI established “UPI as a payment option
in IPO” on November 1st as a new payment channel for retail investors.
UPI handled over 24.26 million One Time Mandate Create Transactions
worth ` 44,381 crore between April and November 2021. The transaction
cap for these types of transactions, which the RBI raised from `1 lakh to `2
lakh in March 2020, was then raised again to `5 lakh in December 2021.
Bhutan was the first nation to implement UPI standards for its QR code very
recently. In terms of BHIM-UPI acceptance at merchant locations, it is the
second nation behind Singapore.
Figure 1.6: UPI Payments Figure 1.7: Number of banks in UPI

1.6.5 Healthcare Services

Healthcare has become one of the largest sectors of the Indian economy, in
terms of both revenue and employment. It has been growing at a CAGR of
22% since 2016, employing 4.7 million people directly. The sector has the
potential to generate 2.7 million additional jobs in India between 2017-22
-- over 500,000 new jobs per year.
India’s healthcare industry comprises hospitals, medical devices and
equipment, health insurance, clinical trials, telemedicine and medical
tourism. Major Segments in India’s Healthcare Sector is shown in Figure
1.8.

26
Figure 1.8: Major Segments in India’s Healthcare Sector Marketing Of Services: An
Introduction

Source: Healthcare. India Brand Equity Foundation. Retrieved December

15, 2020 from [Link] July-2019. pdf.
The country’s relative cost competitiveness and availability of skilled labour
are also making it an increasingly favoured destination for Medical Value
Travel.
The Indian Government has undertaken deep structural and sustained
reforms to strengthen the healthcare sector and has also announced conducive
policies for encouraging FDI. Currently, FDI is permitted up to 100% under
the automatic route (i.e., the non-resident investor or Indian company does
not require approval from the Government of India for the investment)
in the hospital sector and in the manufacture of medical devices. In the
pharmaceutical sector, FDI is permitted up to 100% in greenfield projects
and 74% in brownfield projects under the automatic route. FDI in India’s
Health Sector is shown in table 1.10.
Table 1.10: FDI in India’s Health Sector (2000-2020)
Health-related FDI (USD Million) 25,357
Drugs & Pharmaceuticals 16,501
Hospital & Diagnostic Centres 6,727
Medical & Surgical Appliances 2,130

Source: Note on Health and Pharmaceutical Sector. Invest India.

The Aatmanirbhar Bharat Abhiyaan packages include several short-term
and longer-term measures for the health system, including Production-
Linked Incentive (PLI) schemes for boosting domestic manufacturing
of pharmaceuticals and medical devices. Additionally, India is working
towards becoming a hub for spiritual and wellness tourism, as the country
has much to offer in Ayurveda and Yoga.

27
Marketing of Services : An Ayushman Bharat, the government’s flagship initiative, for instance, marks
Overview a significant shift in focus from the implementation of vertical health
programmes by aiming to enhance the health system comprehensively from
primary level to tertiary care. Through a network of Health and Wellness
Centers (HWCs), its first dimension is to create the primary healthcare system
of the future. This is important given India’s rising non-communicable
disease (NCD) burden because it would allow for the early detection of
diseases and the promotion of good health. In India, there were 60,520
HWCs in use as of February 23, 2021. The Pradhan Mantri Jan Arogya
Yojana (PM-JAY), the other pillar of Ayushman Bharat, has started the shift
toward demand-side financing and strategic purchasing. Expanding PM-
JAY and putting more effort into enhancing health insurance coverage in
general would eventually lead to the creation of new jobs because doing so
necessitates assisting with the capacity building of both purchasers (health
insurance agencies) and healthcare providers.
Long-term changes in attitudes toward personal hygiene, health insurance,
physical fitness, diet, and regular medical check-ups are anticipated to be
spurred by COVID-19. The pandemic has also sped up the introduction of
telemedicine and other digital technologies.
1.6.6 Ports, Shipping and Waterways Services
Port development is essential for the economy. In India, ports handle about
90% of export-import cargo by volume and 70% by value. As of March
2021, all of the ports’ combined cargo capacity was 1,246.86 million tonnes
per annum (MTPA), up from 1,052.23 MTPA in March 2014.
The Ministry of Ports, Shipping, and Waterways’ flagship initiative, the
Sagarmala programme, aims to encourage port-led growth in India by utilising
its 7,500 km of coastline, 14,500 km of potentially navigable waterways,
and its strategic location on important maritime trade routes. The Sagarmala
program’s main goal is to lower the cost of logistics for international, local,
and intrastate trade. At present, the Sagarmala Programme consists of 802
projects for a total of Rs. 5.53 lakh crore. Among these, 181 projects totaling
Rs. 94,712 crore have been finished, and 398 projects totaling Rs. 2.48 lakh
crore are in various stages of completion.
1.6.7 Space Sector
The Indian space programme has expanded significantly since its inception
in the 1960s. Capabilities have been established in the space industry
across all sectors, under the Department of Space’s (DOS) supervision
and principally carried out by its R&D arm, the Indian Space Research
Organization (ISRO). Included in this are homegrown space transportation
systems, space assets like a satellite fleet used for earth observation, satellite
communication, meteorology, and space science and navigation, terrestrial
infrastructure, and a variety of operational projects aimed at putting space
technology to use for social benefit.
From being predominantly a government-driven industry, the space sector
has seen an increase in private sector involvement, both in the conventional
vendor capacity and in end-to-end space operations. In 2020, the government
implemented reforms in the space sector that call for the private sector to
participate in space exploration and the provision of space-based services.
28
As part of these reforms, the Public Sector Undertaking (PSU) in this sector, Marketing Of Services: An
New Space India Limited (NSIL), was given the authority to “own” the Introduction
operational launch vehicles and space assets of ISRO. Additionally, the
current supply-based paradigm was switched to a demand-driven model,
in which NSIL will act as an aggregate of user requirements and secure
agreements. Tata Sky recently signed an MoU with NSIL for the purpose
of using the capacity on board the future communication satellite GSAT-24,
which will be constructed by ISRO and launched by Arianespace, as the
first result in this respect.
In order to promote and oversee space operations in India by NGPEs (non-
government/private entities), the Indian National Space Promotion and
Authorization Center (IN-SPACe) was founded. Additionally, it enables the
private sector to use costly DOS-owned facilities at a fair price. In a little
more than a year since the agency was launched, the interim IN-SPACe
board has received close to 40 proposals from large enterprises, MSMEs,
start-ups, and academia. These proposals encompass a wide range of space-
related operations, including both upstream (producing satellites and launch
vehicles) and downstream (research and development) activities (Earth
Observation applications, communications, etc.).
The Indian space sector is anticipated to take a larger share of the global
space economy, which was close to US$ 447 billion in 2020, due to these
recently undertaken regulatory efforts and private sector participations.
India currently only makes up approximately 2% of the space economy,
well behind the major players, the United States and China.
1.6.8 Start-ups
Over the past years, the number of start-ups in India has increased
significantly; the services sector accounts for the majority of these. Over
14,000 new start-ups were recognised by the government in 2021, compared
to just 733 in 2016–17. As a result, as of January 10, 2022, India had
recognised more than 61,400 start-ups. In 2021, a record number of start-
ups from India (44) achieved unicorn status. It passed the UK to become
the third-highest country in terms of unicorn population, behind the United
States and China, which added 487 and 301 unicorns, respectively, in 2021.
India had 83 unicorns valued at a total of $277.77 billion as of January 14,
2022.
Activity 4
Discuss about your experiences using UPI and other mobile payment apps,
as well as other digital payment options.
………………………………………………………………………………
………………….…………………………………………………………
……………………………………….................................………………
………………………………………………………………………………

1.7 SUMMARY
The term “service” is rather general in concept and includes a wide variety
of services. Services are essentially performance. The service sector has
grown substantially in all the developed economies as well as in India. The
29
Marketing of Services : An reasons for growth in service industries include increasing affluence, more
Overview leisure time, greater life expectancy, increasing complexity of life, etc. In
accordance with the global trend, India’s services industry is expanding
significantly and accounts for more than half of the country’s GDP. The
largest receiver of FDI inflows in India is the services sector. The service
sector has contributed significantly to exports and provided widespread
employment. However, compared to other countries’ experiences, India’s
employment share of services (33 per cent) is significantly lower than
its GVA share of services (54 per cent). This suggests that, compared to
other countries, the services sector has a very high potential to generate
employment in the coming years. The unit also gave you brief overview of
IT BPM Services, tourism, financial services, telecommunication services,
healthcare services, ports, shipping and waterways services, the space
sector, and start-ups in services.

1.8 KEYWORDS
Services: are those separately identifiable, essentially intangible activities
which provide want-satisfaction, and are not necessarily tied to the sale of a
product or another service.
Financial services: include everything from payments and digital banking
to insurance and money management.
Healthcare industry: comprises hospitals, medical devices and equipment,
health insurance, clinical trials, telemedicine and medical tourism.

1.9 Self- Assessment Questions

1. What do you understand by the term ‘service? Describe the reasons
behind the rapid growth of service sector.
2. How do services differ from products? Explain the differences.
3. Explain the trends in global trade in services
4. Discuss the role of the services sector in the growth of Indian
economies.
5. Select any three major service sectors in India and explain their
growth trends.

1.10 References and Further Readings

1) Bateson, J.E.G. (1995). Managing Services Marketing, IIIrd ed.,
Oriando: Dryden Press.
2) Batesou J. (1977). “Do We Need Services Marketing”, Marketing
Consumer Services, New Insights, Report 75-115, Marketing Science
Institute, Boston.
3) Bell, D. (1985). “The Coming of the Pass Industrial society”, The
Marketing of Services, Heineman; London
4) Cowell, D.W. (1996). The Marketing of Services, London: Heineman.

30
5) Gronroos, C. (2015). Service Management and Marketing: Managing Marketing Of Services: An
the Service Profit Logic, 4th Edition, John Wiley & Sons Introduction

6) Hoffman, K.D., Bateson, J.E.G. (2002). Essentials of Services

Marketing, Orlando: Harcourt College Publishers.
7) Kaper, H., Helsdinger, P.V., and Wonter, d.V. Jr (1999). Services
Marketing Management, New York: John Wiley.
8) Kotler, P., Keller, K.L., Koshy, A. and Jha, M. (2018), Marketing
Management: A South Asian Perspective, Pearson Education.
9) Palmer, A. (1998), Principles of Services Marketing, New York:
McGraw Hill.
10) Payne, A. (1993). Essence of Services Marketing, Prentice Hall of
India, New Delhi.
11) Sarwal, R., Prasad, U., Madangopal, K., Kalal, S., Kaur, D., Kumar,
A., Regy, P., Sharma, J. (2021). Investment Opportunities in India’s
Healthcare Sector. NITI Aayog.
12) Shanker, R. (2002) “Services Marketing: Text and Readings,” Excel
Books, New Delhi.
13) Shostack, G.L. (1977), Breaking Free from Product Marketing,
“Journal of Marketing”, Vol. 41, No.2.
14) Stanton, W.J., 1981, “Fundamentals of Marketing”, McGraw Hill;
New York.
15) Teresa A. S. and Dawn. I. (2000). Handbook of Services Marketing
and Management, Sage, New Delhi.
16) Wirtz, J., and Lovelock, C. (2022). Services Marketing: People,
Technology, Strategy, Ninth edition, World Scientific Publishing Co.
Inc.
17) Zeithaml, V.A. and Bitner, M.J. (2000). Services Marketing, Tata
McGraw-Hill, New Delhi.
18) Zeithaml, V.A., Bitner, M.J., and Gremler, D.D.(2018). Services
Marketing: Integrating Customer Focus Across the Firm, Seventh
Edition, McGraw-Hill Education.
[Link]
[Link]

31
 UNIT 2 CONCEPTUAL FRAMEWORK
FOR SERVICES MARKETING

Learning Outcomes
After studying this unit, you should be able to:
●● explain the characteristics of services and their marketing implications
●● assess the ways in which services are classified
●● analyse the services marketing mix.
●● apply the strategic function of service marketing triangle framework
●● appreciate the profound impact of technology on service.
Structure
2.1 Introduction
2.2 Characteristics of Services
2.3 Service Classifications
2.4 The Services Marketing Mix
2.5 The Services Marketing Triangle
2.6 Service and Technology
2.7 Summary
2.8 Keywords
2.9 Self- Assessment Questions
2.10 Further Readings and References

2.1 Introduction
We introduced the concept of a service and the dominance of the service
sector in global economies in unit 1 of the course. As a result of the growth
of the service sector, challenges affecting industries in this sector globally
have received increased attention. A service business is one in which the
buyer’s perception of the value of the offering is mostly based on the
services rendered to him rather than the products made available. We tend
to think about the marketing of services in a more limited way when we
use a framework designed for the marketing of tangible goods. A service,
however, cannot be owned because it is not a physical object. The only
thing we take home after paying for a hotel room is the experience of the
night we spent there. When we fly, an aeroplane transports us; we do not
own it. Shostack, G.L., observed, “It is wrong to imply that services are just
like products ‘except’ for intangibility.” By such logic, apples are just like
oranges, except for their “apple-ness.” “Services are different, so services
marketing is different.”
Over time, it became apparent that service marketing requires a unique
marketing strategy because services and goods are very distinct from one
another. In this unit, we will discuss the distinctive characteristics of services
and develop a conceptual framework for understanding the marketing of
32 services.
 Conceptual Framework for
2.2 CHARACTERISTICS OF SERVICES Services Marketing
Services have a number of unique characteristics that make them so different
from products. Some of the most commonly accepted characteristics are:
a) Intangibility
b) Inseparability
c) Heterogeneity
d) Perishability
e) Ownership
Intangibility
When you buy a cake of soap, you can see, feel, touch, smell and use it to
check its effectiveness in cleaning. But when you pay fees for a term in
college, you are paying for the benefit of deriving knowledge and education
which is delivered to you by teachers. In contrast to the soap where you
can immediately check its benefits, there is no way you can do so in case of
the teachers who are providing you the benefits. Teaching is an intangible
service. When you travel by an aeroplane, the benefit which you are deriving
is a service (transaction) but it has some tangible aspects such as the
particular plane in which you fly (and the food and drink which is served).
In this case the service has both a tangible and intangible aspect as compared
to teaching which has hardly any tangible aspect. Figure 2.1 presents the
tangible-intangible dominant aspect on a goods-service continuum. This
continuum highlights the fact that most services are in reality a combination
of products and services having both tangible and intangible aspects. There
are only a few truly pure tangible products or pure intangible services.
Figure 2.1: Goods Services Continuum

Source: L. G. Shostack, “Breaking Free from Product Marketing,” Journal

of Marketing 41 (April, 1977), pp. 73–80, American Marketing Association.
The distinguishing feature of a service is that its intangible aspect is
dominant. J. Bateson has described the intangible characteristics of services
which make them distinct from products. These intangible features are:
●● A service cannot be touched
●● Precise strandardisation is not possible
●● There is no ownership transfer
●● Production and consumption are inseparable

33
Marketing of Services : An ●● There are no inventories of the service
Overview
●● The consumer is part of the production process so the delivery system
must go to the market or the customer must come to the delivery
system.
Inseparability
In most cases a service cannot be separated from the person or firm providing
it. A service is provided by a person who possesses a particular skill (singer),
by using equipment to handle a tangible product (dry cleaning) or by
allowing access to or use of physical infrastructure (hotel, train). A plumber
has to be physically present to provide the service, the beautician has to
be available to perform the massage. This is in direct contrast to products
which can be produced in the factory today, stocked for the next two, three
or more months and sold when an order is procured.
Heterogeneity
The human element is very much involved in providing and rendering
services and this makes standardisation a very difficult task to achieve. The
doctor who gave you his complete attention in your last visit may behave a
little differently the next time. The new bank clerk who cashed your cheques
may not be as efficient as the previous one and you have to spend more
time for the same activity. This is despite the fact that rules and procedures
have been laid down to reduce the role of the human element and ensure
maximum efficiency.
Airlines, restaurants, banks, hotels have large number of standardised
procedures. You have to reserve a room in a hotel and this is a straight
forward procedure for which all the steps are clearly defined. Human contact
is minimal in the computerised reservation systems, but when you go to the
hotel there will be a person at the reception to hand over the key of your
room. The way this person interacts with you will be an important factor in
your overall assessment of the service provided by the hotel. The rooms, the
food, the facilities may be all perfect, but it is the people interacting with
you who make all the difference between a favourable and unfavourable
perception of the hotel.
Perishability
Services cannot be stored and are perishable. A car mechanic who has no
cars to repair today, spare berths on a train, or unsold seats in a cinema hall
represent a service capacity which is lost forever. Apart from the fact that a
service not fully utilised represents a total loss, the other dimension of this
perishability aspect is that most services may face a fluctuating demand.
There is a peak demand time for buses in the morning and evening (office
hours). Certain train routes are always more heavily booked than others.
This fluctuating demand pattern aggravates the perishability characteristic
of services.
Ownership
When you buy a product you become its owner-be it a pencil, book, shirt,
refrigerator or car. In the case of a service, you may pay for its use but
you never own it. By buying a ticket you can see the evening film show
in the local cinema theater; by paying wages you can hire the services of a
chauffeur who will drive your car; by paying the required charges you can
34
have a marketing research firm survey into the reasons for your product’s Conceptual Framework for
poor sales performance, etc. In case of a service, the payment is not for Services Marketing
purchase, but only for the use or access to or for hire of items or facilities.
A service is purchased for the benefits it provides. If we closely examine the
reasons why products are purchased, we find that they are bought because
they provide certain intangible benefits and satisfactions. Detergent powder
provides the primary benefit of cleanliness, air-conditioners provide the
benefit of a cool, comfortable environment, a mixer-cum-grinder provides
convenience. The only difference between products and services is that
in the latter, the intangible component is greater than in the former. Thus,
services can be treated as a special kind of product.
From a marketing view-point, the same concepts and techniques are
applicable for both products and services. The successful marketing of both
requires market research, product design, product planning and development,
pricing, promotion and distribution. However, for marketing services, the
marketing manager must understand the nature of the five characteristics of
services and the manner in which they impinge on the marketing strategy.
Table 2.1 describes the implications of characteristics of services and how
the marketing strategy can be focused to overcome these constraints. Besides
the constraints highlighted in Table 2.1 are some other factors which have
inhibited the active marketing of services. Professionals such as doctors and
lawyers have traditionally been opposed to the idea of marketing, rather
they have relied on the word of mouth of satisfied customers for increasing
their clientele.
Table: 2.1: Implication of service characteristics and ways of overcoming
them
Service Implications Means of overcoming
characteristics characteristics
Intangibility Sampling difficult. Difficult Focus on benefits.
to judge quality and value Use brand names.
in advance. Not possible to Personalise service.
patent or have copyright. Develop reputation.
Relatively difficult to Increase tangibility
promote (e.g., its physical
representation)
Inseparability Requires presence of Learn to work in larger
performer/producer. Direct groups. Work faster.
sale. Limited scale of Train more service
operations. Geographically performers.
limited market
Heterogeneity Difficult to standardise Careful selection and
quality. training of personnel.
Define behaviour
norms. Reduce role
of human element.
Mechanise and
automate maximum
possible operations.

35
Marketing of Services : An
Overview
Perishability Cannot be stored. Problem of Better match between
demand fluctuation supply and demand by
price reduction in low
demand season
Ownership Customer has access to but Stress advantages of
not ownership of facility or non-ownership such as
activity. easier payment scheme.

Source: Cowell, Donald, ‘The Marketing of Services’. Heinemann, London.

The small size of many service organisations such as beauty parlours, repair
shops, barber shops etc. also limits the use of marketing techniques which
can be successfully used in larger organisations and then there is the case of
service organisations such as schools, hospitals and, universities which enjoy
more demand than they can cope with. Therefore, these organisations have
never felt the need to promote their services in an active manner in the past.
However, due to increased competition, an increase in the number of service
facilities, and an increasing number of private institutions participating in
the education and healthcare sectors, these sectors are promoted heavily.
Activity 1
Looking at inseparability of the service and its producer as a major
characteristic that distinguishes products and services, you can imagine
the implications for marketing the services of consultants, musicians,
stage performers and advertising creatives. Talk to some of these people
or organisations to find out in what ways have they tried to overcome the
marketing implications of inseparability.
………………………………………………………………………………
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2.3 SERVICE CLASSIFICATIONS

A larger number of classification schemes for services have been developed
to provide strategic insights in managing them. Utilizing different bases,
these schemes allow us to understand the nature of the service act, the
relationship between service organisation and its customers, the nature of
service demand and the attributes of a service product. Let us discuss the
schemes briefly.
2.3.1 The Nature of the Service Act
Using two dimensions of tangibility of the service act and to whom services
are directed at. Lovelock has classified services according to whether
services are directed at people or possessions, at minds, physical possessions
or assets. Table 2.2 will help you understand this classification scheme.

36
Table 2.2: Four Broad Classification of Services Conceptual Framework for
Services Marketing
Nature of the Services Directed At
Service Act
People Possessions
Tangible Actions Services directed at Services directed
people’s bodies at goods, physical
Health care possessions
Salons Freight transportations
Restaurant Laundry and Dry
Passenger cleaning
Transportation Lawn care
Intangible Actions Service directed at Services directed at
People’s minds intangible assets
Broadcasting Accounting
Education Banking
Information Insurance
Museums Legal services

Source: Adapted from Lovelock, and Wirtz (2022), Services marketing:

people, technology, strategy, Ninth edition.
2.3.2 Relationship between Service Organisation and
Customers
In the service sector both institutional and individual customers may enter
into continuing relationships with service providers and opt for receiving
services continually. Services can therefore be classified on the basis of
whether the nature of the relationship is continuous or intermittent and
whether a consumer needs to get into a membership relationship with the
service organisation to access and utilise the service.
Table 2.3: Services and Customer Relationships
Type of Relationship
Nature of Delivery Membership Non-membership
Continuous Insurance Police protection
Education Public highway
Banking
Discrete Theatre seat subscrip- Car rental
tion Pay telephone
Commuter tickets Restaurant

2.3.3 How the Service is delivered

Lovelock has used two issues of number of delivery sites (whether single or
multiple) and the method of delivery to classify services in a 2 × 3 matrix.
Then implications here are that the convenience of receiving the service
is the lowest when the customer has to come to the service and must use a
single or specific outlets. As his options multiply, the degree of convenience
can go on rising, from being able to choose desirable sites, to getting access
at convenient locations. (Table 2.4.)

37
Marketing of Services : An Table 2.4 Service Delivery Modes
Overview
Service Delivery Modes
Nature of Interaction be- Availability of outlets
tween Customer and Organ- Single site Multiple site
isation
Customer goes to service or- Theatre Bus Service
ganisation
Fast Food Chain
Service organisation comes to Lawn care Mail delivery
the customer
Pest control Emergency auto repair
Customer and organisation Credit cards Telephone company
transact at arm’s length Broadcasting
Local TV sta-
tion
2.3.4. Proportion of Tangibility and Intangibility
Using the characteristic of intangibility of services, Shostack proposed that
all goods and services can be placed on a tangibility intangibility continuum,
with services clustering towards low to high intangibility. Accordingly,
services can be classified as those with a low intangibility content (a fast-
food restaurant) and a pure service, having very high intangibility content
(Education, Consultancy, Medical advice).
2.3.5. Service Inputs
Services based on this criterion have been classified as primarily equipment
based or primarily people-based service depending upon which input is
primary applied to get service outputs. The equipment-based services can be
further classified according to whether they are fully automated, or consist
of equipment monitored by unskilled persons (lift operators, delivery van
personnel) or need the presence of skilled personnel to man the equipment
(quality control, diagnostics services).
2.3.6 Contact between the Consumer and the Service Provider
Services also differ in the extent of contact that needs to be maintained
between the User and Provider, the marketing implication in this case being
the necessity of physical presence of the provider as well as need to manage
desired quality of personnel in case of high contact services. On this basis all
services can be classified as high contact or low contact services, depending
upon the time a user needs to spend with the service organization/provider
in order to utilize/acquire the service. Examples of low contact services
are telecommunications, dry cleaning and broadcasting while high contact
services are education, hospitality, theatre performance.
2.3.7 Profit and Public vs Private Services
Service can also be classified on the basis of whether they are primarily
directed at public at large or primarily at individuals. The public
services include utilities and infrastructural services like transport and
communication. They also include services provided by the state for public
welfare like hospitals, educational and vocational institution, parks and
museums etc. The private services on the other hand include the whole
gamut of service designed for and consumed by customers as individuals
38
for example, restaurants, beauty care and medical advice. The implications Conceptual Framework for
underlined by this classification manifest themselves in issues regarding Services Marketing
planning and design of service for public vs. private consumption. Involved
here are issues of process, volume and distribution of services when they
are designed as public services. Services have also been classified by Kotler,
as services designed for profit and non-profit services, depending upon the
marketing objectives to be pursued in the exchange of services.
Activity 2
Discuss some of your experiences with low-contact and high-contact
services that have been offered to you.
………………………………………………………………………………
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2.4 THE SERVICES MARKETING MIX

The unique characteristics of services make the traditional 4 P marketing
mix seem inadequate. Careful management of these 4 Ps – Product, Price,
Place and Promotion though essential, are not sufficient for successful
marketing of services. Further the strategies for the four Ps require some
modification while applying to services.
Since services are produced and consumed simultaneously, the contact
personnel or the service delivery personnel become extremely important.
It is during these encounter of service providers and customers i.e., the
process – on which a lot depends with regards to the final outcome as well
as the overall perception of the service by the customer. The actual physical
surroundings during these encounters have also a substantial bearing on the
service delivery.
All these facts lead to the development of an expanded marketing mix with
three new P’s added to the traditional mix (figure 2.2). These are: people,
physical evidence, and process.
●● People - All human actors who play a part in service delivery and thus
influence the buyer’s perceptions; namely, the firm’s personnel, the
customer, and other customers in the service environment
●● Physical evidence - The environment in which the service is delivered
and where the firm and customer interact, and any tangible components
that facilitate performance or communication of the service.
●● Process - The actual procedures, mechanisms and flow of activities
by which the service is delivered – the service delivery and operating
system

39
Marketing of Services : An Figure 2.2: The Marketing Mix for Services
Overview

Source: Booms, B.H. and Bitner, M.J, Marketing Strategies and

Organisation Structure for Services Firms, in Donnelly J and George W.R.
(eds), Marketing of Services, AMA, 1981
Activity 3
Select a service provider that you are familiar with, and explain how each of
the seven Ps of services marketing applies to one of its services.
………………………………………………………………………………
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2.5 The Services Marketing Triangle

Services are produced, delivered, and consumed simultaneously, hence
the nature of marketing departments and marketing functions change
significantly from that of goods. The marketing functions all activities
which influence the preferences of the consumers towards the offerings—is
mainly handled by marketing departments in case of goods. Here as far as
consumers are concerned, marketing departments (the organizational entity
which is responsible for some, but not necessarily all marketing activities
performed by the firm) can plan and implement most of the marketing
activities i.e., the marketing department is able to control almost the total
marketing function. In the service sector the situation is entirely different.
A traditional marketing department in services can only control a minor part
of the marketing function. Usually, it doesn’t have the necessary authority to
manage the buyer/seller interaction. The marketing department, therefore,
cannot plan and implement activities pertaining to interactive marketing
function.
Therefore, the marketing function, which is a key function in service sector
require a special treatment. The total marketing in services include three
different types of marketing as shown in Figure 2.3. The service triangle
is a strategic framework that shows how the company (or “management”),
the consumers, and the employees (or providers) collaborate to develop,
promote, and deliver services. For a service to be successful, three different
40
types of marketing—external marketing, interactive marketing, and Conceptual Framework for
internal marketing—must be successfully implemented. The firm’s external Services Marketing
marketing initiatives, which are placed on the right side of the triangle, are
used to raise customer expectations and make promises to them about what
will be delivered. At the bottom of the triangle lies Interactive marketing or
real-time marketing. Here is where the firm’s employees, representatives,
or subcontractors fulfil or disregard their commitments. If promises are not
kept, customers eventually feel dissatisfied and quit.
Figure 2.3: The Services Marketing Triangle

Internal marketing has a crucial function to play, as indicated by the triangle’s

left side. Some of the measures management takes to help the service
providers fulfil their commitments include hiring, training, motivating,
rewarding, and providing tools and technology. The company will not
succeed unless its service personnel are competent and willing to fulfil the
promises made. All three sides of the triangle are equally important, and
they must be aligned.
As can be seen from the triangle, the traditional marketing mix and marketing
departments basically address to ‘External Marketing’ only. However, all
three sides are critical to successful services marketing and the triangle
cannot be supported in the absence of any one of the sides.
Activity 4
Discuss any of your experiences where the services were not provided as
promised. What was your response? What would you like to suggest to the
service provider to avoid such incidents in the future?
………………………………………………………………………………
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.........................................................................................................……...…

2.6 Service and Technology

The service sector is changing as a result of information technology, which
also has a big impact on how service marketing is conducted. Currently,
41
Marketing of Services : An globalisation and the impact of technology are the two major trends
Overview affecting service marketing. According to Roland T. Rust and Ming-Hui
Huang, “information technology is causing a “service revolution,” resulting
in an expansion of the service sector and an increased importance of service
in all categories of the economy.”
An insightful way to think about how technology has changed society
is to acknowledge that the Internet is essentially “one huge service.” All
businesses and organisations that conduct business online are inherently
providing services, whether they are sharing information, providing basic
customer service, facilitating transactions, or promoting interpersonal
relationships.
Technology offers possibilities for new service offerings, as well as ways
to deliver existing services in more user-friendly and efficient ways.
Innovative business models have been created using new technologies.
For example, platform-based online cab services, which use smartphones
to connect customers with freelance drivers, and peer-to-peer services for
hotel booking etc. Technology makes it easier to conduct transactions (both
retail and business-to-business), find more information, as well as provide
basic customer service (billing, order tracking, and checking account
records, etc.).
Nowadays, smartphones offer a vast array of service apps. Only new
technology made it feasible for services like automated voice mail,
interactive voice response, real-time messaging, chatbots automated teller
machines (ATMs), and others.
Artificial intelligence, big data, cloud computing, user-generated content,
mobile communications, networking technologies, and increasingly app-
based self-service technologies (SSTs) all contribute to a new era of services.
These technologies allow businesses to deliver multi-way information
flow, more individualised services, deeper customer relationships, better
analytics, higher efficiency, and greater profitability. We will discuss in
detail the role of technology in services in unit 14 of this course.
Activity 5
Discuss how some of the services you use have been impacted by internet
and telecommunications technologies, such as mobile apps.
………………………………………………………………………………
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........................................................................................................................

2.7 Summary
The unit outlines the distinctive characteristics of services that demand
distinct strategies for marketing of services. Intangibility, inseparability,
heterogeneity, perishability, and ownership are some of the most commonly
accepted characteristics of services. The unit discussed their marketing
implications and means of overcoming them. Services can be classified
in different ways based on the nature of the service act, the relationship
42
between the service organisation and its customers, the nature of service Conceptual Framework for
demand, and the attributes of a service product. For the successful marketing Services Marketing
of services, effective management of the four Ps—product, price, place,
and promotion—is necessary but insufficient. This understanding led to the
development of an expanded marketing mix that now includes the three
additional Ps—people, physical evidence, and process. The service marketing
triangle framework explains how three distinct types of marketing—
interactive marketing, external marketing, and internal marketing—must be
successfully implemented for a service to be successful. The unit ends with
highlighting the effects of technological innovation on service marketing.

2.8 KEYWORDS
Characteristics of Services: Services have a number of unique
characteristics that make them so different from products. Some of the
most commonly accepted characteristics are: Intangibility, Inseparability,
Heterogeneity, Perishability, Ownership
Services Marketing Mix: also known as 7 Ps- Product, Price, Place,
Promotion, People, Physical evidence, and Process.
Service Triangle: is a strategic framework that shows how the company
(or “management”), the consumers, and the employees (or providers)
collaborate to develop, promote, and deliver services

2.9 Self- Assessment Questions

1) How do services differ from products? What are the marketing
implications of service characteristics?
2) Explain the different classification schemes for services, giving
suitable examples.
3) Briefly discuss the expanded marketing mix for services
4) Discuss the service marketing triangle.
5) How is technology changing the nature of customer service and
service offerings?

2.10 Further Readings and References

1) Bateson, J.E.G. (1995). Managing Services Marketing, IIIrd ed.,
Oriando: Dryden Press.
2) Batesou J. (1977). “Do We Need Services Marketing”, Marketing
Consumer Services, New Insights, Report 75-115, Marketing Science
Institute, Boston.
3) Bell, D. (1985). “The Coming of the Pass Industrial society”, The
Marketing of Services, Heineman; London
4) Cowell, D.W. (1996). The Marketing of Services, London: Heineman.
5) Gronroos, C. (2015). Service Management and Marketing: Managing
the Service Profit Logic, 4th Edition, John Wiley & Sons
6) Hoffman, K.D., Bateson, J.E.G. (2002). Essentials of Services
Marketing, Orlando: Harcourt College Publishers.
43
Marketing of Services : An 7) Kaper, H., Helsdinger, P.V., and Wonter, d.V. Jr (1999). Services
Overview Marketing Management, New York: John Wiley.
8) Kotler, P., Keller, K.L., Koshy, A. and Jha, M. (2018), Marketing
Management: A South Asian Perspective, Pearson Education.
9) Palmer, A. (1998), Principles of Services Marketing, New York:
McGraw Hill.
10) Payne, A. (1993). Essence of Services Marketing, Prentice Hall of
India, New Delhi.
11) Rust, R.T., and Huang, M.H. (2014). “The Service Revolution and
the Transformation of Marketing Science,” Marketing Science 33, pp.
206–221.
12) Sarwal, R., Prasad, U., Madangopal, K., Kalal, S., Kaur, D., Kumar,
A., Regy, P., Sharma, J. (2021). Investment Opportunities in India’s
Healthcare Sector. NITI Aayog.
13) Shanker, R. (2002) “Services Marketing: Text and Readings,” Excel
Books, New Delhi.
14) Shostack, G.L. (1977), Breaking Free from Product Marketing,
“Journal of Marketing”, Vol. 41, No.2.
15) Stanton, W.J., 1981, “Fundamentals of Marketing”, McGraw Hill;
New York.
16) Teresa A. S. and Dawn. I. (2000). Handbook of Services Marketing
and Management, Sage, New Delhi.
17) Wirtz, J., and Lovelock, C. (2022). Services Marketing: People,
Technology, Strategy, Ninth edition, World Scientific Publishing Co.
Inc.
18) Zeithaml, V.A. and Bitner, M.J. (2000). Services Marketing, Tata
McGraw-Hill, New Delhi.
19) Zeithaml, V.A., Bitner, M.J., and Gremler, D.D.(2018). Services
Marketing: Integrating Customer Focus Across the Firm, Seventh
Edition, McGraw-Hill Education.

44
UNIT 3 CONSUMER BEHAVIOUR IN
SERVICES

Learning Outcomes
After studying this unit, you should be able to:
●● relate the basic concepts of consumer behaviour to services marketing
●● discuss the impact of services characteristics on services buying
●● outline the stages in consumer decision making process with reference
to services
●● explain the factors influencing buyer behaviour for services;
●● explain the significance of consumer expectation and perception for
service buying decisions
●● apply the implications of search credence and credence qualities for
consumer decisions making process for services.
●● discuss the recent developments related to consumer behaviour
research in services
Structure
3.1 Introduction
3.2 Classification of Buyers
3.3 Service Characteristics and Implications for Service Buying Decisions
3.4 Consumer Decision-making Process for Services
3.5 Factors Influencing Consumer Decision making in Services
3.6 Impact of Recent Developments and Technology on Consumer
Behaviour in Services
3.7 Summary
3.8 Key Words
3.9 Self-Assessment Questions
3.10 Project Question
3.11 Further Readings and References

3.1 INTRODUCTION
All of us buy different services for various reasons. One person may prefer
to go to a restaurant for good food while the other may opt for an exclusive
restaurant, for status. One person may prefer to read ‘The Times of India’
early in the morning, while the other may prefer to read the same newspaper
after coming back from the office. There are women who don’t go to beauty
parlours at all, whereas there are others who go regularly, and yet others
who prefer to call the service representatives at home to get such services at
home, a trend which became very prevalent in the post pandemic situation,
with providers like Urban Company registering tremendous growth in
personal care services vertical. Similarly, there are many such examples
45
Marketing of Services : An telling us that people show different behaviour in buying and using different
Overview products and services.
The discipline of marketing which helps in developing a deeper insight in these
behavioural differences is called “Buyer Behaviour”. We have developed an
appreciation that the meaning of marketing orientation is that a firm should
aim all its efforts at satisfying its customers. And to keep customers satisfied
it becomes essential to have a deeper knowledge regarding the behaviour
of the buyer. You have covered the basic concepts of consumer behaviour
in your core course MMPC-006 Marketing Management, in this course,
we will build upon the concepts already covered. The links to the contents
already study by you are provided to enable you to go through the materials
as and when required. Since the generic description for decision-making
roles, factors influencing decision making, models of consumer decision
making have all covered by you, the focus in this unit will be on developing
your exposure to the concepts specifically relevant to services.

3.2 CLASSIFICATION OF BUYERS

Typically, buyers can be classified into two categories: Individual and
Organizational. Individual buyers are those who buy a particular service
for their own or family consumption or use. For example, you may like to
buy an Annual Maintenance Contract (AMC) for your personal computer
installed in your house, or a household’s insurance cover for your family. The
other category of buyers is called organizational buyers. The organizational
buyers are those who buy services for the organizational use. For example,
a government department may buy a similar AMC for the office computers.
Another example can be of a hospital which may buy cleaning or security
services for the hospital.
However, irrespective of the type of buyer, the buying roles remain the same,
though the number of persons who play these roles may vary. In organization
purchases, also called B-2-B (Business to Business) buying activity is a
formalised one following a well laid out process. The concept of buying
centre identified responsibilities in the purchase process is well understood
in organizational buying. Because of large number of people working as
influencers, generally the B-2-B purchases take longer time to minimize on
perceived risks. The elements which are reviewed in the evaluation process
might range from price, quality, reliability, etc. As the complexity of the
service offer increases, in B-2-B purchases, the importance of confidence in
service supplier increases.
Activity 1
Consider that you are buying an insurance policy for your home. At the
same time since your office has moved to a new building and several new
equipments and systems have been installed. You as the manager have been
asked to arrange for a new policy for comprehensive coverage of the office
property.
How will your buying process for the same service differ in the two cases?
Clearly analyse the reason for the difference
……………………………………………………………………………
46
……………………………………………………………………………… Consumer Behaviour in
……………………………………………………………………………… Services
…………………………………………………....................................……

3.3 Service Characteristics and

implications for service buying
decisions

You have studied service characteristics and their marketing implications,

in detail in the Unit 2 of this course. On account of characteristics like
intangibility, heterogeneity and inseparability, several implications arise
for the consumer buying behaviour. These include information search
behaviour, risk perception, brand loyalty and attribution of dissatisfaction.
Let us look at these implications before we explore consumer decision
process for services at length.
The Intangibility continuum: One of the most significant differences
between products and services in that of services being intangible. However,
it is also true that very few products are purely intangible or totally tangible.
Instead, services tend to be more intangible than manufactured products,
and manufactured products tend to be more tangible than services. Because
of this intangibility characteristic one of the most significant differences
between goods and services that emerges that in goods “Search Qualities”
dominate while services are dominated by “Experience and Credence
Qualities”.
Figure 3.1: Continuum of evaluation for different types of products

Source: Zeithaml and Bitner, Services Marketing, Tata McGraw Hill.P-23.

Search qualities are those attributes of a product which the consumer can
determine before the purchase. This is more common in physical goods. For
example, colour, style, fit, feel, smell etc.
The second is the experience qualities, which are the attributes which can
only be determined after the purchase, or during the process of consumption.
The third, is the credence qualities i.e. characteristics which the consumer
47
Marketing of Services : An cannot evaluate even after the consumption, like auto repair or medical
Overview diagnosis. For example, it may be difficult for a patient to assess whether
or not a hospital provided appropriate services. Such characteristics exist
invariably in services. In nutshell, most goods are high in search qualities
and most services are high in experience or credence qualities. Figure 3.1
gives a continuum of evaluation for different types of products based on
search, experience and credence qualities.
As services are rich in experience and credence qualities, the following
important aspects related to consumer decisions making process need to be
understood.
Information Search: on account of the heterogeneity and high intangibility
characteristic in the case of services, consumers rely more on personal
sources of information for pre purchase evaluation. Also, they indulge in
more post purchase evaluation than pre purchase evaluation and as a result
the amount of post purchase evaluation done in services is much higher than
in case of goods. Some of the reasons for this are:
i. Mass communication conveys very little about experience qualities.
ii. Most of the service providers are local/independent and therefore lack
the financial or marketing acumen to promote their offering.
iii. Shared advertising is rare as the producer and retailer are the same in
services.
iv. Very few attributes of services could be discovered prior to purchase.
Criteria for Evaluating Quality: Consumers normally tend to evaluate the
quality of a service offering through its price and physical facilities provided
by the service provider. Higher the price better is the quality perceived.
Same holds good for physical facilities. This is especially true when other
cues for evaluating quality are not available.
Evoked Set of Alternatives: In services the customers’ “evoked set of
offering” is small. This is due to the following:
i) Differences in retailing: In services the offerings of the competitors are
rarely exhibited unlike in case of goods. Also, it is highly uncommon
to find more than one provider of a service in a given area.
ii) The consideration set is small as very little information is available
prior to purchase.
In case of Non-professional services, the evoked set includes self-provision
of services. e.g. housekeeping, laundry etc.
Innovation Diffusion: Consumer adoption of innovations is much slower
in case of services than in products. This is because consumers have to find
a distinct benefit in the offering of the competitor to shift to that. Complexity
of services makes it difficult to evaluate the ability of the provider and
indivisibility does not allow trying the service before consumption.
Perceived Risk: Consumers associate greater risk with buying services
than with goods. This is on account of intangibility of services which
makes it difficult to get information about the offering. Most services are
not standardized even if they are provided by the same provider because a

48
lot depends on the person’s caliber and ability to customize it based on the Consumer Behaviour in
need of the consumer. Another important reason is that unlike in goods most Services
services do not come with guarantees/warranties.
Brand Loyalty: Brand switching is lesser with services as compared to
products. This is due to the following factors:
i) Greater search and monetary cost associated with moving to another
service provider.
ii) Fewer substitutes are available for services.
iii) The rapport that a consumer creates with a service provider prevents
him from moving to a new provider as there is always a possibility
that the new provider may not understand his needs as well as the
previous one did.
Attribution of Dissatisfaction: The provision of the service is based on
the requirements stated by the consumer. As such he holds himself partly
responsible if the service provided is not up to his requirements and hence
complains less frequently.
Perceived Control: The model proposed by Bateson emphasizes that
consumers evaluate services control, they are able to exercise in a given
situation. Perceived control theory is based on the premise that customers
feel more satisfied with a service if they believe that they have greater control
over the service delivery. This notion is useful when designing new services.
Similarly, if the employees also think the same way, satisfaction drawn
from the job is higher. However, they two may not co-exist simultaneously,
therefore, it is important for the organization to balance out between the
two, by developing adequate service standards, communicating the same
to the consumers, to deliver the services adhering to those standards and
developing systems for operational efficiency.
Activity 2
If the branch manager of a new bank branch office is considering to give
‘Corporate Card’ to his executives, what decision process he is likely to go
through based on the service characteristics? Discuss.
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3.4 CONSUMER DECISION MAKING PROCESS

FOR SERVICES
As you are already familiar, consumer buying decisions process consists of
the following stages
1. Need recognition
2. Search for information
49
Marketing of Services : An 3. Alternative evaluation
Overview
4. Buying decision
5. Search for supplier
6. Purchase
7. Post purchase behaviour
In the case of services, it is useful to understand the stages of buying as three
distinct phases, as proposed by Fisk, who divided the purchase behaviour
into three distinct stages, namely, Pre-consumption Phase, Consumption
Phase (Service Encounter), and Post-consumption Phase, and outlined the
important behavioural differences with respect to service buying.
The first stage called the pre-purchase stage includes activities which take
place before the actual purchase decision. These activities are typically
called, problem/need recognition, information search on various alternatives
and evaluation of alternatives to select the best of them. At this stage, the
individual recognizes a need or problem whose solution usually involves a
potential purchase. He searches for information from various sources-both
internal and external and arrives at a set of possible solutions (the evoked
set) and analyses these– to select the best of them.
The need recognition will drive search of information regarding the available
alternatives and their evaluation. The need recognition may be activated by
●● a physical condition-your hunger may activate a search for food
delivery services.
●● Unconscious motivation or aspiration- your desire to feel good about
yourself may activate the need for a haircut.
●● External influences like a marketing ad for AC servicing may alert
you to the need to get the home AC serviced well before the onset of
summer.
The second stage is called the consumption stage. This arises if the outcome
of the prepurchase stage is a decision to buy a certain brand of service. At
this stage, the expectations of the pre-consumption stage are compared with
the actual service delivery. This stage is therefore also called the service
encounter stage.
Finally, the post-purchase stage, which involves the evaluation of the service
encounter as positive or negative, and results in a decision on whether to
purchase the same service again or not based on the service consumption
being satisfactory or unsatisfactory.

50
Table 3.1: Consumer Decision Making stages for services Consumer Behaviour in
Services

Adapted from Writz and Lovelock, Services Marketing: People, Technology,

Strategy,9th edition
Let us go through each of the steps shown in the figure 3.1 and the related
concepts as shared in the table 3.1
Pre-Consumption stage
The first stage in the decision process as shared in the above paragraphs,
consists of need recognition, information search and alternative evaluation.
51
Marketing of Services : An The related concepts perception and management of risk role of consumer
Overview expectations and zone of tolerance are also discussed.
Need recognition: Awareness or arousal of a need in the buyer’s mind may
be activated by either a physical condition (your being thirsty may make you
aware of the need to order a cold drink), a personal aspiration or self-image
(you want to your best for an upcoming social event) or external influences
like a marketing stimulus in the form of a compelling an advertisement for
comprehensive insurance, or a friend’s glowing review of a newly released
movie.
Once the need is aroused, the consumer will take action to satisfy the need
by searching for alternatives that would satisfy the need. The identification
of what would be an appropriate satisfier is strongly affected by culture,
social status, reference groups and that type of family socialization the
buyer has experienced while growing up. This step will lead to the second
stage of information search
Information search: the need recognition stage triggers the search for
alternatives to satisfy the need. As noted above in the section or service
characteristics and consumer behaviour, the information search may
involve alternatives like self-provision or buying (your preparing a fresh
lime for yourself or ordering it) once the decision to buy the service is
made, several alternatives may be studied to finalise the one that would fit
your requirements the most. As one you already know, the evoked set for
services are much smaller than for products. Your evoked set for services
may be drawn from your experiences, the marketing stimuli that you are
exposed to, the information coming in from your reference groups or social
set and so on. When you are buying a high involvement service for the first
time your information search will also involve search for criteria which may
be used to evaluate the alternatives. For example, that you are searching
for a management institution for your MBA, you might want to the most
important criteria to rate the institution vis a vis your need and aspiration,
whether it is the placement record, the faculty quality and credentials, that
teaching-learning processes or the flexibility required for working students.
Alternative evaluation:
You have just studied about the search experience and credence qualities
of services. While evaluating alternatives, you may find the service
alternatives you were looking may have some search qualities, for example
in case of the management institute, you may be able to find the faculty
profiles, the placement records, the details of the infrastructure and the
attended flexibility is provided to the students on the university website.
That teaching-learning processes however partly belong to the category
of experience qualities, and can only be found out by talking to existing
students or alumni.
For quite some time, marketers have been using the facilitating of technology
to expose potential buyers to some experience qualities in case of services.
For example, in case of vacation destinations, videos and visual tours,
interactive chats using a chatbot, buyer reviews and testimonials are shared
to let the potential customer have a clear idea of what can be expected in
a given destination. A lot of service providers use media-based service
52
demonstrations focusing on the experience of consumers consuming the Consumer Behaviour in
service Services

Using the same example in respect of credence qualities, the health and
hygiene conditions, the consistency in cleaning services, quality of food
preparation are some of the variables about which evaluation even after
experiencing the service may be difficult. The higher the extent of the
intangibility and heterogeneity in a service, the higher would be the risk
perception of the consumer on account of the difficulty in evaluation of
alternatives since a lot of qualities of will be higher on credence qualities
than search qualities.
Perception and management of risk by service consumer:
Risk perception in services is much higher in all those cases where the
proportion of experience qualities and credence qualities is higher than that
of search qualities, making the purchase evaluation difficult. Consumers
also feel higher risk in situations where the results of the service performance
are non-reversible (e.g., a bad haircut, a knee replacement surgery) or long-
term in nature (e. g. school education, investment advice or weight loss
program.)
Typically, service consumers handle this risk by seeking information from
personal sources who may have used the service, relying on reputed service
providers, visiting service facilities or even talking to service employees.
Services that include service warranties or guarantees aid risk reduction
for consumers. Consumers increasingly also use the Internet to extensive
research for comparative information on alternatives, collect and analyse
buyer reviews and also looked at independent ratings.
Marketers use this understanding of risk avoidance behaviour to develop
strategies like
- providing as much information as possible through service brochures,
websites and possibilities of interaction through Chatbots, service
consultants available online, demonstration videos and even site visits.
Other frequently used options are
- enabling free trials – Tata Sky, Netflix and Prime video, the leading
Entertainment Service providers, in their promotional offers free trial for
a week or ten days to expose potential consumers to the possibilities of the
service.
Building Trust by sharing of credentials: many professional services like
consultancy, architecture, medicine, legal services and even education
service providers displayed their credentials and certifications in an attempt
to convey to consumers the quality and credentials of people who may be
performing the service
Promotion targeted at service in action and post consumption- integrated
marketing communication targeted at building familiarity with the service
in its, showing consumers experiencing the service and focusing on key
service dimensions are used to reduce the uncertainty associated with
services and often help to build consumer confidence

53
Marketing of Services : An The role of consumer expectations:
Overview
During the pre-consumption stage, and through the processes of information
search and alternative evaluation, consumers access a lot of information
about service attributes vis a vis their own aspirations, comparative qualities
of the competing providers, exposure to the public and social media
regarding these services and end up forming a set of expectations regarding
their chosen alternative for service consumption, consumer expectations
tend to vary over situations and over time. A very hungry consumer, with
a very little time to have lunch before his next meeting starts, would have
high expectations of the service delivery time but not very high expectations
regarding table service or even food presentation. The same customer may
have very high expectations of table service and food presentation, when he
is taking his family out for dinner, but may not be very finicky about fast
delivery.
Service expectations have a major impact on the feeling of customer
satisfaction during the consumption and the post consumption stage.
Range of services expectations as developed during the pre-consumption
phase can be better understood by looking at the range of expectations for
a given service.
As shown in the figure 3.2 below, the adequate service represents the
minimum level of service that the consumer will accept.
The desired service is the expectation of the service that the consumer
wishes and hopes for. The desired service level is formed on the basis of the
explicit and implicit promises made by the service provider, the experiences
of other users and the consumers own experience.
Figure 3.2: Consumer Expectation and Zone of Tolerance

There is a whole range of acceptable performance that lies between adequate

service and the desired service. All these performances fall into the zone of
tolerance for the consumer. Based on the heterogeneity characteristic of
services, service performance by even good providers may vary a little from
the ideal performance. All service performance that is above the adequate
service level but still capable of adequately satisfying the consumer falls
into the zone of tolerance. While marketers aspire to deliver the desired
service levels at all times, marketing action needs to be strongly focused
54
on ensuring that the service performance does not fall below the zone of Consumer Behaviour in
tolerance. Services

The service expectations and purchase decisions of consumers are also

affected by the evaluation of what level of service performance can be
predicted from a given provider based on earlier performance experience
as shared by other users and reference group members. That expectation
of performance has also been referred to as “predicted service” in service
marketing literature.
Purchase decision:
Once the consumers have evaluated their alternatives for a given service
choice on the basis of information search and comparison of attributes, the
consumer decides on the best solution. You may recall the content studied on
consumer extensive problem solving, limited problem solving and Routinised
response behaviour in your basic course MMPC-006, Unit 4 Consumer
Behaviour ([Link]
pdf )
When the service buying decision relates to frequently bought low-
involvement services, like choosing a taxi service for travel to and from the
office, or using a courier service, the decision process follows the routinised
response behaviour, with very little alternative evaluation done as the buyer
usually has a preferred choice, the evoked set is very small, and the buyer’s
experience with the service is very high. The decision, therefore, is taken
quickly, with little effort spent on information search as the buyer is fully
aware of the existing alternatives and their attributes.
In cases where service is infrequently bought or there is a long-time gap
between subsequent purchases, the buyer follows a limited problem-
solving process, then he has some but not all information about the decision
alternatives, as the alternatives may have changed between his last and
present purchase situations, new service attributes in some alternatives
may have been added, or his own service expectations may have changed.
Examples could include interior painting of the house, packing and
moving services, selection of a new healthcare provider or choosing a new
programme of study. The buyer has a clear understanding of the need, some
information about previous alternatives, but not enough information about
new alternatives or new ways of resolving his need. As a result, he conducts
some research to better understand the new service attributes, compares
earlier and new service editions, and then makes a decision.
In cases where the services are bought for the very first time, or if it is
a high-cost or high-involvement service on account of personal relevance
or importance of the purchase, the situation is categorised as an extensive
problem-solving situation. Examples could be buying a catering service for
an important family event or professional event; selecting a honeymoon
vacation package; selecting a hospital or a practitioner for cardiac surgery.
In such cases, extensive search for information is followed by effort and
time spent on alternative evaluation in what is perceived as a high-risk
decision. A lot of personal sources are utilised for information search and
many of the risk reduction steps described in the preceding paragraphs are
taken. The decision is only taken after careful alternative evaluation. It’s the
purchase decision that leads to the next phase, i.e., the consumption phase.
55
Marketing of Services : An Activity- 3
Overview
Consider the selection of a service like online tuition for your child. What
the influences that will influence your service expectation levels and zone
of tolerance?
……………………………………………………………………………
………………………………………………………………………………
………………………………………………………………………………
…………………………................................................................................
.......................................................................................................................
.......................................................................................................................
.......................................................................................................................

Consumption stage:
This is the stage where the consumer experiences the service, which begins
after some positive action, like placing a service order, or applying for
service delivery, is undertaken by the consumer. This stage is also called
the “service encounter stage” and may involve a series of interactions with
the service provider. Depending upon whether this is a low-contact service,
involving return of no contact with the service provider (for example, using
your ATM card for a tight range of banking services) or a high-contact service,
involving a series of interactions with the service provider (for example,
joining an undergraduate degree programme at the university, buying a
long-term maintenance contract for your household appliances, investing
in a long-term savings plan), the consumer is at this stage of evaluating
whether the actual service provision meets his pre-purchase expectations or
not. The term “Moments of Truth” was introduced by Richard Norman to
show the importance of the contact point for service encounters.
Then the service provider and the customer have indirect contact with each
other, either in person or remotely. The potential to convert this encounter
into a satisfying or delightful experience depends a lot on the skill, empathy,
and concern of the service contact person.
In the case of high-contact services, on account of the frequent contact and
interaction, the possibility of developing a customer relationship conducive
to all stakeholders is very high. Understanding this, service marketers in
high-contact services create specific customer relationship and customer
retention policies so that every encounter with a service person adds to the
positive evaluation of the service experience.
On account of the rapid adoption of technology, a number of high-contact
services are actually being converted into low-contact ones. For example,
on-line buying of insurance services.
Post Consumption Stage:
This is the stage where the consumer, having experienced the service,
evaluates the service experience in terms of meeting, failing to meet or
exceeding his expectations.
The pre-purchase confirmation of service expectations provides the
consumer satisfaction tactical defined as a fulfilment response. The inability
of the service to meet consumer expectations leaves the consumer with
a feeling of dissonance and dissatisfaction. In cases where, the service
56
provider not only meets the expectations but exceeds them, the fulfilment Consumer Behaviour in
response becomes one of customer delight. Services

As long as the service performance falls within the zone of tolerance of the
consumers, they are reasonably satisfied with the service. When the service
performance falls below the adequate service level, it results in customer
dissatisfaction. Investment of funds on the basis of comparative analysis
and data made available to related services is an example.
The three-stage model of the consumer decision process for services—
pre consumption, service encounter, and post-consumption—helps us
to understand how service consumers recognise their needs, search for
alternative solutions, address perceived risks, choose, use, and consume a
particular service, and finally, evaluate their service experience, resulting in
a customer satisfaction outcome or otherwise. The outcome, if satisfactory,
will have an outcome of repeat purchase and continued satisfying encounters
will mature into brand loyalty.

3.5 FACTORS INFLUENCING BUYER

BEHAVIOUR
There are a number of factors or variables which affect the buying behaviour.
For example; people go on holiday during the vacation time so vacations
become a variable. Similarly, a person may not buy any of the saving schemes
till he comes in the tax bracket, so “tax payer” becomes a variable. A person
may visit an exclusive restaurant during ‘happy hours’, which he does not
visit normally. In this case the marketing efforts of the organization (sales
person and the scheme) becomes the factor influencing to buy. Similarly,
there are other factors which affect the buying decision. These factors can
be classified into four major categories, namely: situational factors, buyer’s
socio-cultural factors, personal factors and psychological factors. These
have been summarized in the Figure 3.3
Figure 3.3: Factors Influencing Buyer Behaviour

57
Marketing of Services : An The decision making is affected by the psychological field, i.e., the internal
Overview influences. These influences include motivation, perception, learning,
personality and attitudes, the socio-cultural influences like family, reference
groups, and culture; and situational factors like time. The output portion
of the consumer decision making model includes two associated activities,
i.e., purchase behaviour and post-purchase evaluation, which you just went
through in section 3.4 of this unit.

3.6 IMPACT OF RECENT DEVELOPMENTS

AND TECHNOLOGY ON CONSUMER
BEHAVIOUR IN SERVICES: IMPLICATIONS
FOR MARKETERS
Service marketers and consumers find themselves living in a world buffeted
by rapid winds of change, some of them, like the pandemic, completely
unprecedented ones. Because of the business situations that resulted from
the pandemic, the rapid advancements in technology and its use by both
marketers and consumers have accelerated in the last two years. Recent
developments in services marketing and consumption include a greater
emphasis on customer retention, understanding returns on investment as
well as relationships, analysing consumer lifetime value, using technology
to obtain very comprehensive factual information on consumer expectations,
alternative evaluation processes, consumer satisfaction and loyalty patterns.
From the marketers’ side, major applications of recent technology are being
implemented to improve operational efficiencies, service delivery and
packing of service performances. Let us take a brief look at some of these
developments and their implications for marketing action.
1. Understanding consumer expectations and applying them to
personalization: the facilitation provided by data analytics, artificial
intelligence, and simulation has enabled marketers to access actionable
information on the changing expectations of consumers. This has
in turn supported better target market identification, customization,
and delivery of more personalised services and built engagement.
One has only to look at the technology-supported banking services
being offered currently to understand how technology has enabled
standardisation on the one hand and the possibilities of personalization
at the end customer level.
2. Internationalization and market access: the increased use of the
Internet by consumers has increased the trend of market taxes of
services beyond national boundaries; the dynamic growth of massive
open online courses (MOOCs) and consumer acceptance of quality
learning at any time and from any location has created dynamically
different trends in the design, customization, and delivery of
educational services.
3. Rising focus on customer retention: while consumer acquisition and
attention are both important, there is ample research evidence to show
that customer retention is far more profitable to service organisations
in terms of comparative return on investment. Internet connectivity
58 has enabled consumers to be exposed to competitive offers, and ease
 of switching is much more prevalent (a common example is that of Consumer Behaviour in
mobile number portability when consumers switch providers). This Services
has forced service marketers to engage more with consumers, be
more responsive to service requests and complaints, and actually
reward long-term relationships. Loyalty bonuses, accumulation of
usage points, and banking privileges are all examples of rewarding
service patronage over time.
4. Increasing use of service bundling: in order to create possibilities for
comprehensively covering customer needs, trends in service bundling
have accelerated following the disruption of many businesses during
the pandemic period. Not only have service organizations, in an effort
to satisfy many related needs, been bundling services from their
own product line, but they have also collaborated with other service
providers to create attractive value packages for their consumers to
enhance the overall value proposition but also to retain consumers in
an intensifying competitive situation. Examples abound of telecom
service providers tying up with entertainment services to offer
packages like a one-year Netflix or Amazon Prime membership free
with their mobile post-paid services; travel aggregators like Make My
Trip, providing insurance, accommodation, and car rental packages to
provide end-to-end service solutions to ensure that consumers remain
engaged with them.
5. Using the virtual experience: as the enabling power of technology,
marketers are using virtual reality and simulations to provide service
tours, demonstrations of service processes, and actual demonstrations,
with the objective of reducing pre-purchase risk, enabling virtual
experience, and attracting consumer interest. In high-contact services
like hospitals, where experience qualities are important determinants
of buying, such tools help to build consumer familiarity and trust.
6. Enabling consumer reviews and interaction: Consumer service
marketers are increasingly encouraging the formation of service
clubs and fan clubs to provide opportunities for customers to share
experiences, reviews, and commentary, as well as have detailed
interactions, through such platforms. Reviews from satisfied
customers and demonstration of the resolution of complaints again
help to build credibility and trust while aiding in alternative evaluation
by prospective consumers.
7. Simplifying access, delivery, and post-consumption experience: After
learning from the initial bottlenecks in online ordering access and
delivery, a clear trend of progress is that of simplification of search,
information provision, payment protocols, ordering, and acquiring
services. Very common examples can be seen in the ordering of
insurance, food, movie tickets, travel, accommodation booking and
household services like cleaning, painting, pest control and so on.
8. Rising connectivity of consumers: Using multiple devices and
connectivity options, consumers are hyper connected to businesses
and highly aware of their consumption options, experiences of other
customers, new developments in the market, and the various deals
59
Marketing of Services : An being offered by different providers as well as the integrator platforms.
Overview The very high penetration of mobile-based Internet access has
accelerated the use of digital services and has enabled ease of access
for consumers. Research shows that over 50% of the e-commerce
in the U.S. was transacted through mobile phones, and 54% of
the daily commuters in the UK used the travel time to search for
products and services and to transact. ( [Link]
impact-of-technology-on-consumer-behaviour/#:~:text=New%20
technology%20has%20empowered%20consumers,share%2 ).
Marketers can use the opportunity created by this trend to engage
with consumers on an everyday basis, build relationships, and create
customised promotions.
9. Rising consumer expectations: Consumers today are exposed to
competitive offers, service innovations, and feature improvements
on an immediate basis, as well as the views and reviews of other
service users. These developments have served to raise consumer
expectations both in terms of service attributes and service quality.
Expectations of resolution of complaints and service recovery are
also now rising. Marketers have responded by creating and utilising
Marketing Automation Software and AI-enabled chatbots to help
connect with consumers better.
The high proliferation of service providers, rising competition, and more
informed and empowered consumers have created a new dynamic in the
service provider and consumer relationship. Widespread penetration and
usage of mobile technology and Internet-based facilitation through other
devices have created new opportunities for consumers, widened markets for
service providers, opened up opportunities for collaboration and bundling,
and enabled the beating up of competitive advantages through effective
customer retention and customer relationship management.

3.7 SUMMARY
The buying process for services is typically different from those for
manufactured goods. Many service characteristics like intangibility,
heterogeneity, and inseparability result in the way consumers identify their
consumption needs, evaluate their alternatives, and manage the risk of service
purchases. This unit looks at the implications of service characteristics on
consumer buying decisions, explains in detail the stages in the consumer
decision process and the service concepts involved at each of these stages.
A brief recap of the factors influencing buyer behaviour has been done.
The unit also discusses the recent trends that have impacted consumption
of services, including the impact of technology and the implications these
developments have for marketers and providers of services.

3.8 Key Words

Consumption stage: the stage where the consumer experiences the service.
It is also called the “service encounter stage” and involves interactions with
the service provider.

60
Credence qualities are those that cannot be verified even after purchase Consumer Behaviour in
and consumption. Services

Experience qualities are those that can only be verified after purchase and
consumption of the product.
Individual buyers are those who buy a particular service for their own or
family’s consumption or use.
Organizational buyers are those who buy services for the organisational
use
Post Consumption Stage: where the consumer, having experienced the
service, evaluates the service experience in terms of meeting, failing to
meet, or exceeding his expectations.
Pre-Consumption stage: the first stage in the decision process and consists
of need recognition, information search, and alternative evaluation.
Search qualities are those that can be verified easily prior to purchase by
actual inspection of the good;

3.9 SELF ASSESSMENT QUESTIONS

1. In what ways does the buying process differ between an individual
buyer and an organisational buyer? Use examples from your own
experience to demonstrate.
2. What are the differences between ‘search’, ‘experience’, and
‘credence’ qualities? What are the implications of these qualities for
service marketers? Explain with the help of examples.
3. Why do consumers of services perceive higher levels of risk associated
with their purchases? Discuss with the help of examples.
4. Using the example of availing a home loan, explain the consumer
decision-making process using the three-stage model suggested in
this unit. Describe the various steps engaged by you as a prospective
buyer, under each of the stages.
5. What are the implications of the concepts of adequate service, desired
service, and zone of tolerance for services for a marketer? Taking the
example of an AC maintenance service, explain the service levels and
the inputs that can be drawn for the service delivery.

3.10 Project Question

Estimate your monthly spending for a typical month. What proportion of
your spending is spent on services versus goods? What would you cut if you
had to reduce your spending?

3.11 FURTHER READINGS

1) Baron, S. and Harris, K. (2003). Services Marketing – Text and Cases,
Palgrave.
2) Bateson, J.E.G., Hoffman, K.D. (2012) Services Marketing, Dryden
Press

61
Marketing of Services : An 3) Fisk, R.P. (1981). Toward a Consumption/Evaluation Process Model
Overview for Services, in Donnelly and George, Marketing of Services, pp.191-
195.
4) Kurtz, D.L. and Clow, K.E. (2002). Service Marketing, John Wiley
5) Palmer, A. (1998). Principles of Services Marketing, London:
McGraw Hill, p.87
6) Payne, A. (1996). Essence of Services Marketing, Prentice Hall of
India
7) Ravi Shanker (2002). Services Marketing- The Indian Perspective,
Excel Books
8) Rust, R.T., Zahorik, A.J. and Keiningham, T.L. (1996). Service
Marketing, Harper Collins,
9) Swartz, T.A. and Iacobucci, D. (2000). Handbook of Services
Marketing and Management, Sage Publications
10) Wirtz, J., and Lovelock, C. (2022). Services Marketing: People,
Technology, Strategy, Ninth edition, World Scientific Publishing Co.
Inc.
11) Woodruffe, H. (1997). Services Marketing, Macmillan India
12) Zeithaml, V., Parasuraman, A., Berry, L. (1985). Delivering Quality
Service–Balancing Customer Perceptions and Expectations, The Free
Press, 1990
13) Zeithaml, V., Parasuraman, A., Berry, L. (1985). “Problems and
Strategies in Services Marketing”, Journal of Marketing, Spring.
14) Zeithmal, V.A., Bitner, M.J., and Gremler, D.D. (2018). Services
Marketing: Integrating Customer Focus Across The Firm, Seventh
Edition, McGraw-Hill, New York.

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