Definition

A service is any activity that one party can offer to another which is essentially
intangible and does not result in the ownership of anything (Kotler et al, 2002).
The production of service may or may not be linked to a physical product. A service is a
performance carried out by one party to another that is essentially intangible and does
not result in the ownership of anything. Services can also be defined as activities,
benefits or satisfactions that are offered for sale. Services are intangible,
heterogeneous (variable), inseparable, and perishable. More about products and
services is discussed in detail in separate chapters in the Part 3 which covers the
marketing mix.

While the definition of marketing given by AMA includes ideas as a kind of an offering ---
just like a product or service --- there is no definition of idea in marketing literature. The
thesaurus of United States English says an idea is a thought, impression, belief,
objective, or concept. Here, as we discuss ideas in the context of marketing where we
see them as equivalent to products and services, we believe that ideas have the same
characteristics as services. Therefore, ideas, in our opinion, are intangible, variable,
inseparable, and perishable. Like a service, an idea may or may not be linked to a
tangible product. The person selling an idea needs to be credible.

Political parties sell ideas to their markets, voters. In a campaign, a party may say ‘vote
for us for equitable land redistribution, job creation, and a well-run economy’. Even
when the party wins the election, this may remain a promise, a dream or an ‘air cake’ if
you like! Nothing of the sort promised may happen! NGOs sell ideas too e.g. when
they educate people on their civic rights, HIV and when they lobby the government to
amend, repeal or enact a given piece of legislation. Almost all tangible products have
idea elements as well. Let us take a hypothetical brand of a shoe polish, Wonder
Shine, for instance (and you could substitute it for a real brand like Kiwi or Nugget).
Wonder Shine may be promoted as “a polish that shines and protects”. So customers
of Wonder Shine would buy the polish with the expectation that it will shine and protect
their shoes. The shining and protecting elements which we are told are in the shoe

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polish are ideas. The extent to which those ideas are fulfilled is debatable. In fact, the
whole argument in the shining and protection characteristics may be complicated by the
fact that people may have different meanings and degrees of those elements.

Characteristics of services
In an extensive review of services literature between 1963 and 1983, Zeithaml, et al.,
(1985) found that the most frequently cited characteristics were intangibility,
inseparability, heterogeneity and perishability.

Literature on services marketing state that services have unique characteristics—

intangibility, inseparability, heterogeneity (variability), and perishability (Kolter,
2000:429; 1). The characteristics present challenges in marketing services (McDonald,
1999:13) and they oversimplify the real-world environment and don’t apply to all
services (Lovelock, 2001:9). Professional services appear to be more intangible than
most other services (Morgan, 1991:8). Even within professional services, some are
more intangible than others. For example, management consulting and accounting
services are perceived as more intangible than architectural and surgery services.

Intangibility
Bateson (1979) made a critical distinction between physical and mental intangibility, the
former referring to impalpability while the latter refers to that which cannot be grasped
mentally thus making it doubly intangible.

Unlike goods, services cannot be touched, tasted, smelt, heard or felt because they are
intangible. A person wanting a haircut cannot see the result before the purchase and
actual performance of the haircut. Because of intangibility measuring the quality of
services can be very different and difficult compared to measuring the quality of goods.
By their nature goods have tangible benchmarks against which quality can be assessed
e.g. durability, reliability, tastes. Because service offerings lack tangible characteristics

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that the buyer can evaluate before, uncertainty is increased. The lack of intangibility
has a number of marketing implications on services.

Variability/Heterogeneity
The reasons that have been cited are the differences between service workers as well
as the varying interaction with customers from day to day (Sasser, Olsen & Wyckoff,
1978) and variability caused by workers in manufacturing (Rathmell, 1974; Levitt, 1972;
Eiglier & Langeard, 1975, 1977; Morris & Johnston, 1987). More recently however,
Zeithaml and Bitner (2003) have cited the difference between customer’s needs and
experiences of services. Other influential factors such as weather, crowding and
service locations have been studied (Desmet, van Looy & van Dierdonck, 1998).

No service performance act or provider is exactly the same as another. Because

services depend on who provides them and when, where and how they are provided
their quality is considerably variable (heterogeneous). In service provision it is common
that one staff can provide a high quality service depending on her frame of mind at a
given time but when her mood changes as she services a different customer service
quality may change too.

Inseparability
Lovelock, et al., (2004:28-29) explain that co-producing customers have also been
referred to as “partial employees” and that co-production refers to customers that
engage in self-service utilizing systems, facilities or equipment supplied by the service
provider. Services are typically produced and consumed simultaneously. This is not
true for physical goods, which are manufactured, put into inventory, distributed through
multiple resellers, and consumed later. Thus the barber providing a ‘hair cut’ has to
perform the service on the person requiring it. The consumer and the provider cannot
be separated in the course of delivering the service.

Perishability
Lovelock, et al., (2004:29) found that literature contains multiple views on the

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meaning and implications of perishability and concluded the commonality to be that
services can’t be saved, stored for later reuse, resold or returned and have a strong
dependence on time. They conclude that unused capacity is wasted in times of low
demand and that un-serviced demand occur when demand exceeds supply.
Services cannot be stored because they are perishable. If a cargo ship leaves a port
with only 50 percent of its capacity used, it will have wasted the other 50 percent and
would not recover it. The perishable characteristic means that services cannot be
stored for later sale and use. Because of the perishable nature of services, in
Zimbabwe some dentists and general practitioners charge the full consultation fee to
patients who fail to turn up for appointments or at least inform them of the cancellation
at least two hours before the appointment. Again learner drivers in Zimbabwe are
required by driving schools they will have booked driving lessons with to notify the
schools of lesson cancellation at least 24 hours in advance or the learner is charged the
full price of a cancelled (missed) lesson.

The perishable nature of services is not a problem when demand is steady. But when
demand fluctuates service firms often have challenges managing high and low demand
at specific times of the day, week or season. Public transport companies have to own
much more equipment because of peak hour demand than they would if demand were
constant throughout the day. For example, in the United Kingdom commuter transport
operators (buses, trams, trains and the ‘tube’) have differential pricing for peak hours
and off-peak hours. Because of this differential pricing strategy peak hour commuters
pay higher fare than off-peak hour commuters. In Zimbabwe many commuter omnibus
operators, especially those who own small buses popularly known as kombis (seating
capacity of about 20 passengers) park most of their vehicles for the greater part of off-
peak hours. During the rush hour (early to mid morning and late afternoon to evening)
the kombis charge a premium fare because they are a bit faster than the conventional
large buses. However, some kombis operate throughout the day charging the same
fare as conventional buses and picking and dropping short-distances commuters, which
they rarely do during peak hours when they shun commuters travelling short distances.

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Lack of ownership

A number of authors in service marketing argue that services are also characterized by
lack of ownership. This argument to an extent is unnecessary because if something is
intangible (i.e. can not be seen, smelt, touched, displayed) and is inseparable from the
person providing it and person consuming it, then it is obvious that such a thing cannot
be owned. Buyers can feel, touch and closely examine physical goods before buying
them. Thus once someone has bought a tangible product she can own it and dispose
of the product when she no longer needs it. In contrast, service products lack that
quality of ownership. Service consumers have access to the service for a limited time.
A person has a right to a seat or standing space in commuter train or bus on a particular
day and, perhaps, time once she has bought a ticket for a specific day and time. The
fact that the commuter has bought a ticket does not entitle the person to claim
ownership of the bus company or the vehicle in which he will commute. She just has a
right to commuting services at a given time. Kotler et al (2002:543) argues that
because of the lack of ownership, service providers must take special effort to reinforce
their brand identity and affinity with the consumer by one or more of the following
methods:

a) They could offer incentives to consumers to use their services again, as in the case
of the frequent-flyer schemes promoted by British Airways and Travel Passes
offered by Scandinavian airlines.

b) They could create membership clubs or associations to give an impression of

ownership (e.g. British Airways’ executive clubs for air travelers, IKEA’s family club
membership).

c) Where appropriate, service providers might run the disadvantage of non-ownership

into a benefit e.g. an industrial design consultant might argue that, by employing his
or her expertise, the customer would actually be reducing costs, given that the
alternative would be for that customer to employ a full-time designer with equally

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 specialized knowledge. Paying for access to services rather than performing
activities in-house (e.g. warehousing) reduces capital cost, while also giving greater
flexibility to a business.

The services marketing mix is an extension of the 4-Ps framework. The essential
elements of product, promotion, price and place remain but three additional variables –
people, physical evidence and process – are included to 7–Ps mix. The need for the
extension is due to the high degree of direct contact between the CE providers and the
customers, the highly visible nature of the service process, and the simultaneity of the
production and consumption. While it is possible to discuss people, physical evidence
and process within the original-Ps framework (for example people can be considered
part of the product offering) the extension allows a more thorough analysis of the
marketing ingredients necessary for successful services marketing.

People – because of the simultaneity of production and consumption in services the CE

staff occupy the key position in influencing customer’s perceptions of product quality. In
fact the service quality is inseparable from the quality of service provider. An important
marketing task is to set standards to improve quality of services provided by employees
and monitor their performance. Without training and control employees tend to be
variable in their performance leading to variable service quality. Training is crucial so
that employees understand the appropriate forms of behaviour and trainees adopt the
best practises of the andragogy. An organization can positioning through people e.g.
ensuring that staff and management are totally customer focused. Positioning through
people requires training and change in business culture.

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People are the most important element of any service or experience. Services
tend to be produced and consumed at the same moment, and aspects of the
customer experience are altered to meet the 'individual needs' of the person
consuming it. Most of us can think of a situation where the personal service
offered by individuals has made or tainted a tour, vacation or restaurant
meal. People buy from people that they like, so the attitude, skills and
appearance of all staff need to be first class. There are some ways in which
people add value to an experience, as part of the marketing mix - training,
personal selling and customer service.

Training.

All customer facing personnel need to be trained and developed to maintain a high
quality of personal service. Training should begin as soon as the individual starts
working for an organization during an induction. The induction will involve the person in
the organization's culture for the first time, as well as briefing him or her on day-to-day
policies and procedures. At this very early stage the training needs of the individual are
identified. A training and development plan is constructed for the individual whom sets
out personal goals that can be linked into future appraisals. In practice most training is
either 'on-the-job' or 'off-the-job.' On-the-job training involves training whilst the job is
being performed e.g. training of bar staff. Off-the-job training sees learning taking place
at a college, training centre or conference facility. Attention needs to be paid to
Continuing Professional Development (CPD) where employees see their professional
learning as a lifelong process of training and development.

Personal Selling

There are different kinds of salesperson. There is the product delivery salesperson. His
or her main task is to deliver the product, and selling is of less importance e.g. fast food,
or mail. The second type is the order taker, and these may be either 'internal' or
'external.' The internal sales person would take an order by telephone, e-mail or over a

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counter. The external sales person would be working in the field. In both cases little
selling is done. The next sort of sales person is the missionary.
Here, as with those missionaries that promote faith, the salesperson builds goodwill with
customers with the longer-term aim of generating orders. Again, actually closing the
sale is not of great importance at this early stage. The forth type is the technical
salesperson, e.g. a technical sales engineer. Their in-depth knowledge supports them
as they advise customers on the best purchase for their needs. Finally, there
are creative sellers. Creative sellers work to persuade buyers to give them an order.
This is tough selling, and tends to o offer the biggest incentives. The skill is identifying
the needs of a customer and persuading them that they need to satisfy their previously
unidentified need by giving an order.

Customer Service

Many products, services and experiences are supported by customer services teams.
Customer services provided expertise (e.g. on the selection of financial services),
technical support (e.g. offering advice on IT and software) and coordinate the customer
interface (e.g. controlling service engineers, or communicating with a salesman). The
disposition and attitude of such people is vitally important to a company. The way in
which a complaint is handled can mean the difference between retaining or losing a
customer, or improving or ruining a company's reputation. Today, customer service can
be face-to-face, over the telephone or using the Internet. People tend to buy from
people that they like, and so effective customer service is vital. Customer services can
add value by offering customers technical support and expertise and advice.

Physical evidence – this is the environment in which the service is delivered and any
tangible goods that facilitate the performance and communication of the service.
Customers look for clues to the likely quality of a service also by inspecting the tangible
evidence. For example, prospective customers may look to the design of learning
materials, the appearance of facilities, staff, etc. Physical evidence concern tangible

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assets of an organization: vehicles, buildings, offices, furniture, uniforms which project a
given image in the minds of target customers. Smart buildings and vehicles for instance
project a good corporate image but if they are dilapidated they image becomes
unfavorable. A good or bad corporate image filters down to the products. Services
firms like banks and insurance companies are very particular about how their banking
halls and offices look like and even organization selling tangible goods should be
concerned too. Some renowned retail chains in Zimbabwe have floor tiles that are
coming off and fridges that are rusting particularly those in their shops in high density
areas. That reflects badly on their corporate images and some consumers may begin to
shun even the products that they sell.

Process – this means procedures, mechanism and flow of activities by which a service
is acquired. Process decisions radically affect how a service is delivered to
customers. The service in CE includes several processes e.g. first contact with
customers, administrative procedure regarding course delivery, preparation,
delivery and evaluation of the courses. The following guideline can be useful for
successful CE management:
• ensure that marketing happens at all levels from the marketing department to
where the service is provided
• consider introducing flexibility in providing the service; when feasible customize
the service to the needs of customers
• recruit high quality staff treat them well and communicate clearly to them: their
attitudes and behavior are the key to service quality and differentiations
• attempt to market to existing customers to increase their use of the service, or to
take up new service products
• sep up a quick response facility to customer problems and complaints
• employ new technology to provide better services at lower costs
• use branding to clearly differentiate service offering from the competition in the
minds of target customers.

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Processes - an organization can position itself according to how efficient and effective
its processes are. An industrial marketing concern can position itself according to the
efficiency and effectiveness of its order processing system i.e. speed and accuracy with
which it processes customer orders and queries. Insurance companies can position
themselves according to the efficiency in processing claims while banks can position
themselves according to the speed with which they serve customers in ordinary
transactions such as deposits and withdrawals and the speed with which they process
customers’ loan applications. In the UK banks such as Barclays have decision-making
software that has revolutionized credit card and loan applications for example.
Customer information is simply fed into a computer and a reject or approve decision for
a credit card or loan is communicated within five to 10 minutes while the customer
waits. So an applicant leaves the banking hall knowing whether her application has
been accepted or not. In Zimbabwe the People Own savings Bank (POSB) is ‘famous’
for long queues especially at month-ends. POSB is also very slow to adapt to
technological changes. All this has positioning implications for the bank.

The differential advantage and branding

Only few products are unique. Often the challenge lays in finding a way to differentiate
your products from a rival’s near-identical offerings. The basic question says: “How can
I get an advantage over the competition?”
When your products are better than those of your competitors, and when customers
recognize this superiority, you have a real advantage. Few organisations are in this
position. Most find that there is a little or nothing to distinguish their own products from
competitors. To gain competitive advantage, uncover not just differences but also
attributes that customer’s value. Make sure the differences are meaningful to
customers, so that your product is preferable to the others available.

Often it is the little things that count. Customers may choose your product over a
competitor’s identical product because they prefer your lecturers or because you give
them coffee while delivery of the courses. Pay attention to details that could make a

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difference. A genuine customer-centric approach will differentiate you from competitors.
Show your commitment to customers and ensure that staffs are emphatic. Review
company systems and processes.

Marketing strategies for service firms

Until recently, service firms lagged behind manufacturing firms in their use of marketing
(Kotler et al, 2002:544). Some of the reasons why service firm did not embrace
marketing are as follows:

a) Many service firms are small (e.g. key cutting services, shoe repair firms, hair
saloons, dental practices, legal firms, etc) and often consider formal management
and marketing techniques unnecessary and expensive.

b) Some service organisations (e.g. schools, churches, colleges and universities) were
at one time in great demand hence did not need marketing until recently. Let us take
the example of universities in Zimbabwe. Until around the early 1990s when two new
universities were allowed by the government to operate in Zimbabwe, the University
of Zimbabwe (UZ) was a pure monopoly in university education provision. However,
the country now boasts of more than 10 universities hence there is competition for
students. This means that marketing university education has become a necessity
now. The UZ has to reconfigure itself to the changes taking place in its environment.

c) Others like legal, medical, and accounting practices believed that it was
unprofessional to use marketing techniques, because the was not discrete to do so
but they are increasingly realizing the power of marketing tools.

Recently, the author facilitated a workshop on marketing principles to a group of

managers coming from different organisations in Zimbabwe who are registered on the
MANCOSA (Management College of Southern Africa) MBA programme, a private
degree awarding college registered in South Africa. One of the participants in the group

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was a lawyer working in a legal firm. This confirms that slowly marketing techniques are
being adopted in professions in Zimbabwe that traditionally shunned marketing.

Dentists too have to market and in fact they are except that their professional
associations in Zimbabwe are having arguments over whether dentists should use an
unsubtle form of marketing. A recent conservation the author has with a dental
therapist working for a dentist who trained at Minnesota University in the United States
of America confirmed the power of marketing in dental services. The therapist said a
few years back a white American couple which she believed to be tourists walked into
their surgery without appointment as they exclaimed: “He trained in the United States.”
Apparently, she said, the couple should have been looking for a dentist because they
had an emergent problem and when they came across a sign written Dr so and so
Dental Surgery, DDS, Minnesota University, they felt comfortable to attended by the
dentist. Obviously the unique selling proposition to this couple was the fact that the
dentist had trained in the USA. This proves that professional service firms have to
exploit every opportunity to market themselves in any way possible. The business card
is a very important marketing tool. It helps if a professional states her professional and
academic qualifications after her name and perhaps where she got the qualifications.
Chartered accounting firms in Zimbabwe although probably still barred from using
unsubtle marketing techniques use indirect advertising every year. The firms usually
insert advertisements in the press congratulating their trainee chartered accountants
who have passed one stage or the final qualifying examinations of the chartered
accounting qualification. While this form of advertising may not be taken as part of
marketing efforts under their professional ethics barring them from using marketing
techniques, certainly that is marketing. The firms actually raise awareness about the
existence of their firms.

Because service firms differ from companies producing tangible products, they need
additional marketing approaches. In a product business, products are fairly
standardized and can wait for customers while displayed on shelves. But in a service
firm, because of the nature of services, the frontline service employees e.g. bank tellers

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have to interact with the customer requiring banking services in order to provide the
required services. Therefore, services firms have to interact effectively with customers
to create superior customer value. A firm is able to create and deliver superior value
through its staff and the service production and support processes supporting staff.
Thus the soft elements of the marketing mix or 3Ps i.e. people, physical evidence and
processes are believed to be more important to service firms than they are to
manufacturing companies. However, the traditional 4Ps of marketing (product, price,
promotion and place) remain as important to service firms as they are to manufacturing
companies and also the 3Ps are no more important to service firms than they are to
manufacturing firms.

The service profit chain

For service firms to be successful, Heskett et al (1994) suggested a profit-service chain

which links service firms’ profit with employee and customer satisfaction. The service-
profit chain has five links as follows:

1. Internal service quality - superior employee selection and training, a quality work
environment and strong support for those dealing with customers, which results in …

2. Satisfied and productive service employees - more satisfied, loyal and hardworking
employees, which results in …

3. Greater service value - more effective and efficient customer value creation and
service delivery, which results in …

4. Satisfied and loyal customers - satisfied customers who remain loyal, repeat
purchase and refer other customers, which results in …

5. Healthy service profits and growth - superior service firm performance.

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Kotler et al (2002:547) argues that achieving service profits and growth goals starts with
‘taking care of those who take care of customers’. Hence there are three types of
marketing which are supported by three stakeholder groups (see Figure 1).

Compa
ny
(M
ana
geme
nt)

In
ter
n a
l Exte
rna
l
m
ar
k e
tin
g m
ar
k e
tin
g

E
mplo
yee
s C
usto
m e
rs
In
ter
a c
tiv
e
mar
k e
tin
g

Figure 1: Three types of marketing in service industries. Source: Kotler el al

(2002:547).

Figure 1 above does not just show us the three types of marketing which Kotler et al
argues can be found in service firms but also the three pillars which support marketing
in any organization whether service or manufacturing firm. Therefore, we are arguing
that the three types of marketing are not only suitable to service firms but manufacturing
companies as well. Before explaining the three types of marketing in the figure above,
we have to briefly explore the three pillars on which all the types of marketing have to
be hinged on or targeted. From the figure, we can actually see there are three
stakeholders to any service encounter. One, we have the company (we have modified
the model to include management of the service firm or provider), the employees, and
customers (that is external customers because staff are also customers, internal
customers).

Internal marketing concerns all the activities done by company management to

empower motivate and delight the internal customers or staff. In other words we are
saying one of the roles of management in any organization is design systems that
motivate, train and empower its operational people and all supporting staff to work as a
team in delivering customer value. Teamwork and the spirit of comradeship are key
elements to the success of the firm.

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Internal marketing highlights the importance of customer focus which in the true sense
of marketing orientation should include both internal and external customers. For a
customer orientation culture to be fostered in a company, certainly the company has to
practice the marketing concept. The marketing concept through its four tenets is the
pillar for effective marketing. The tenets of the marketing concept are customer focus,
integrated marketing, target marketing and profitability. Customer focus means service
firms have to carry out market research to identify and interpret correct service needs
and wants of customers. Marketing by its nature is an organization-wide function not
just the prerogative of the marketing department as many people believe. Integrated
marketing means everyone in the organization, the service organization, from the board
through management to the operational and support staff has a role in marketing. No
service firm including the very big firms has adequate resources (financial, human and
material) to be in every possible service market. As we have already explained
according to GATS services classification systems there are over 144 services and no
firm has capacity to offer all of them. This means service entrepreneurs and firms have
to decide carefully which service market to invest in, thus they have to segment and
focus their efforts on a particular service sector and market and this entails target
marketing. Market targeting or selecting a market to focus on entails segmentation,
which is the act of dividing a large heterogeneous market into small homogenous
segments. This means that the service market as a whole is huge and therefore
composed of customers requiring different types of services not just one type of service.
Therefore, a service firm has to carefully analyze that huge service market to identify
the various service needs and wants and select one or a few that the firm competently
provide.

Service firms, like the manufacturing counterparts, have to be profit oriented. In finance
and accountancy terms profit is revenue less costs. But this definition is only correct
from commercial point of view and yet profit is not only monetary-wise. Public and non-
governmental organizations like the police, defense forces, and charities like churches,
human rights organisations, environmental lobbies, etc also make profit in terms of the

15
impact their activities have on society. The profit realized by the police is reduced crime
rates, for instance. Profit in the sense of human rights organizations is respect for
human rights that can be directly linked to civic education activities. Also the finance
and accountancy definition of profit is warped since customers (i.e. those who buy an
organization’s products and services expect to profit from their purchases). From the
public sector and NGOs and customers point of view we can see that profit is the
benefit that a person gets from an activity and this may not necessarily be money. So
service organisations have to clearly define their profit objectives from the point of view
of their orientation i.e. monetary or non-monetary profit and then from the customer’s
point of view if they are to deliver superior service value.

From Figure 1 above we can also clearly see that in-as-much-as internal marketing is
important to service organizations (and manufacturing companies as a matter of fact),
external marketing is also equally important. External marketing is concerned with
marketing activities involving the whole organization which is geared towards the
external market (customers). Again as in internal marketing, the marketing concept with
its four principles is key. Then, of course, we have a third type of marketing which
according to the model proffered by Kotler et al as reproduced with minor adaptation
above is interactive marketing. Interactive marketing is concerned with the interaction
of employees (of the company) and the service consumers (customers). While Kotler et
al raise valid points for the case for interactive marketing such as the importance of the
interaction between the person providing the service and the person consuming the
service what we can not see, in another view, is the difference between external
marketing and interactive marketing. Is it not the case that interactive marketing is
subsumed in external marketing? Anyway, we do appreciate the arguments Kotler et al
advances for the case for interactive marketing i.e. the interaction between the
company’s employees and ultimate customers. Yes the quality of buyer-seller relations
is key to service firms because the characteristics of services (intangibility,
variability/heterogeneity, inseparability, perishability, and lack of ownership). Service
quality is judged by consumers not just in terms of technical quality e.g. the success of a
minor surgical operation like a tooth extraction or teeth cleaning by a dentist but also

16
functional quality which is the concern that the dentist shows to the dental patient prior
to, during and after service delivering. In other words we are saying a dentist should not
jump into asking the patient what has brought him to the clinic but can start with a social
conversation to make the patient comfortable. And in that conversation, if the patient
informs the dentist that he lost his mother a few weeks ago, certainly the doctor has to
show sympathy to the patient. In service marketing the service provider has to show
concern for the customer.

Although the theory of marketing remains similar as in manufactured goods, the

conventional marketing thinking has to be adapted to be suitable to service marketing.
Kotler et al (2000) argue that services companies have to focus on three key marketing
duties which are competitive differentiation, service quality and productivity. However,
the key to manufacturing companies are these three key tasks.

Competitive differentiation for services

Services are difficult to differentiate because of their unique qualities compared to

goods (i.e. services are intangible, variable/heterogeneous, inseparable from the person
providing the service and the person consuming the service, perishable, and the
consumers can not own them. Added to challenges paused by these unique features to
the efforts to differentiate services, the fact that service processes cannot be patented
means that competitors can easily copy service processes and compete effectively
against the innovating service firms. To deal with the challenge paused by competing
service firms which copy other service firms processes perhaps the innovating service
firm has to rely to core competences. Core competencies are unique abilities and skills
possessed by a firm’s human capital or people which cannot be easily copied or
reproduced by competitors.

Because we are arguing that marketing and management theory is universal whether it
is applied to service or manufacturing firms, therefore there cannot be a separate theory
for service differentiation. So differentiate services firms can rely on any suitable

17
contemporary marketing and management concepts. Service firms have to realize that
service differentiation should take place across the entire hierarchy of the organization
i.e. from the corporate level to the operational level hence Porter (1980) competitive
generic strategy and the marketing mix are useful frameworks in differentiating services.

Application of Porter generic competitive strategy in service differentiation

At the corporate level senior management have to be clear on how they want their
service firm to compete or to be positioned in the market. Of course, competitive
positioning is both a corporate-level role and marketing function role, which means
everyone in the organization has to contribute towards differentiating service offerings of
the firm. This should not come as a surprise that business level, functional level and
operational management including operatives have to partake in crafting and
implementing competitive strategy in service firms (see Figure 2, the hierarchy of
strategies model)

Corporate-level management

Business-level management

Functional-level management
e.g. marketing, finance, HR

operational-level management

Figure 2. Hierarchy of strategies model. Source:

Differentiation strategy is firmly entrenched in competitive generic strategy (see Figure

3). Porter (1980) agues that firms can compete on two dimensions which are
competitive advantage and competitive scope. Competitive advantage in embedded in
the organization’s processes, technologies, and human capital (resources) hence it is
part and parcel of an organization’s core competences. Competitive scope is the

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general description or profile of the market in which the organization would like to
compete or operate. Competitive advantage is either underpinned on lower cost or
differentiation. Lower costs mark an organization’s ability to reduce its costs and pass
on the advantage to its customers in terms of lower prices compared to costs and hence
prices of the competition. According to the US English thesaurus, differentiation means
the same as discrimination, segregating, demarcation, delineation, or separation. In the
management and marketing context differentiating is the act of making a company or
product easily identifiable from the competition or competitors’ offerings.

COMPETITIVE ADVANTAGE

Lower cost Differentian

Broad
Target
Cost leadership
Differentiation

COMPETITIVE
SCOPE

Cost Focus Differentiation Focus

Narrow
Target

Figure 3. Competitive generic strategy. Michael Porter (1980), Competitive strategy,

reproduced in de Wit and Meyer (1998), Strategy: Process, Content, Context, Second
Edition, and Thompson Publishing.

We have already stated that differentiation is on two dimensions of which we have

already explained the competitive advantage dimension. Now we are explaining the
remaining dimension, competitive scope. Perhaps we may need to separate the words
in the phrase and explain each. Competitive means gung ho, spirited or ready for
action. Scope means the range, capacity, extent, scale or possibility. Therefore,

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competitive scope is simply the extent or choices that an organization has to compete in
market, i.e. an organization can compete either in a broad target market or narrow
target market hence Porter (1980) talks broad target and narrow target (see Figure 3
above).

The strategy options in the generic strategy model are cost leadership, differentiation,
cost focus and differentiation focus. Porter (1980) argues that organisations should
select and compete on any one competitive strategy. The selection of more than one
competitive strategy would lead to a fifth strategy which he called ‘stuck in the middle’ or
‘middle-of-the-road strategy’. He further argued that firms stuck in the middle cannot be
successful. All the five strategic options of the generic strategy model are fully
explained in the chapter on strategic marketing planning so we will repeat the
explanation here.

Service firms therefore have to think about how they can differentiate themselves using
the strategic options of the Porter’s generic strategy. For firms that have huge capital,
human and financial resources they can afford to compete on cost leadership,
differentiation or cost focus. But firms with a small resource base can compete on
differentiation focus. Since our theme is how to differentiate the service firm, obviously
we have to focus on either differentiation focus or differentiation.

Application of the marketing mix in service differentiation - A hypothetical case

study for Air Harare.

Once the service firm has selected its preferred differentiation choice then it has to
decide its operational marketing differentiation strategy too. At the operational level,
marketing differentiation has to be conceived of through the application of the whole
range of the marketing mix or 7Ps of marketing. Contrary to conceptual and empirical
literature on service marketing which tend to place much emphasis on the soft elements
of the marketing mix (i.e. people, physical evidence and process) we argue that an

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informed service organization should rather explore all the 7Ps of marketing to the
depth sufficient enough to differentiate the firm from other firms in its service sector.

Let us take a hypothetical case study of the airline industry in Zimbabwe before 2001
when Harare international Airport received more than a dozen international flights daily
(now the situation has changed because of the political and economic challenges the
country is going through). Suppose we are consulting on marketing strategies for a
private airline (we shall call it Air Harare). We are told that the problem facing the airline
is that it cannot attract a full load of passengers on its Harare-Gatwick flight. We carry
out a marketing audit and find that there are thirty other foreign airlines which ply the
same route and their service offering closely resemble the service offering of Air Harare
only terms of the economy class. Through our audit we also learn that Air Zimbabwe
has no marketing problems getting passengers for its economy class but for the
business class. Therefore, we carryout a small survey to find out the preferred services
levels of business travelers between London and Harare and find out that they want
exclusive services. Basing on our findings we then compile our consultancy report
recommending the marketing mix decisions Air Harare has to take in terms of the 7Ps of
marketing. The marketing mix decisions have to be geared to differentiate Air Harare’s
business class as an exclusive product. Here is how our recommendations (and note
the differentiating aspects):

Product:
More leg room than most business class products.
Computer access so that executives can type or read their documents
Five star service in terms of food and entertainment choices

Price
Our business class ticket should cost 10 percent more than other airlines on the
same route (to cater for increased costs and communicate the high levels of
service)

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 Promotion
Make use of exclusive travel agents focusing on the business traveler market, in
the UK
In Zimbabwe, establish our own separate business traveler agency
Advertise the service in business and financial media

Place
As in promotion

People
Make hospitality a cultural value for our staff and management.
Offer royal service

Physical evidence
Repaint the external of all our aircraft and redesign in the interior
Initiate a strong corporate identity programme (with new logo)
Establish an exclusive executive lounge at the terminal in at Harare and
Gatwick.

Processes
Train staff in teamwork and to be efficient and effective in serving customers,
internal and external.

Managing service quality

Service quality is as critical to the strategic survival of service firms as it is to

manufacturing companies. Consumers of pure services expect high levels of quality

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e.g. in the retail sector, banks, insurance, barber shops, electronic repair shops,
garages, hospitals, local authorities, etc. It is for this reason that many developed and
developing countries have established national quality standards organizations which
are affiliated to the International Standards Organization (ISO). The British Standards is
the national standard organization in Britain and in the USA there is Malcolm Balbridge
National Quality Award. In Zimbabwe, we have the Standard Association of Zimbabwe
(SAZ). SAZ purpose is to assist manufacturing and service organizations in Zimbabwe
to attain national and international quality standards (we will provide more details on
SAZ in future). In some highly developed countries like Sweden service quality
management is a national concern hence the government has taken a lead role through
initiatives such as the Swedish Customer Satisfaction Barometer. Other countries need
to benchmark the Swedish Customer Satisfaction Barometer because service quality is
a thorn issues in many countries including Zimbabwe. Such a barometer would provide
a guide to providing quality services.

Dimensions of Word-of-mouth Past experience Buyer's needs Advertising

quality
Access
Credibility
Knowledge
Reliability
Security Expected service
Competence
Communication
Perceived service
Courtessy
quality
Responsiveness
Tangibles
Perceived service

Figure 4. Key determinants of perceived service quality. Source: Kotler et al

(2002:551)

A service organization can derive competitive advantage from offering high quality
service. The service-profit chain (discussed above) shows that although quality comes
with expense, investment in quality programme leads to better profits as satisfied
customers repeat purchase and spread positive word-of-mouth about the company.
Good word-of-mouth facilitates both market penetration and development.

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According to Kotler et al (2002:551) there a number of factors that has to interact if ideal
service quality (in the eyes of the customer) is to be achieved (see Figure 4, the key
determinants of perceived service quality). Because of the unique characteristics of
services (intangibility, variability, perishability, and inseparability) it is challenging to
deliver quality services. The “key determinants of perceived quality service” suggest
that a service company identifies the expected customer needs in terms of service
quality. Having done so the organization should now concentrate on the dimensions of
service quality such as access, credibility, knowledge, reliability, security, competence,
communication, courtesy, responsiveness, and tangibles. If there is a gap between
expected service and perceived service the service provider has to address the gap. A
study carried out a few years ago identified the following criteria as determinants of
quality: access (is the service easy to access); credibility (is the organization credible
and trustworthy?); knowledge (does the service provider really understand customer’
needs); reliability (how dependable and consistent is the service); security (is the
service low-risk or free from danger? In the late 1980s a few customers of backyard
hair saloons in Zimbabwe sustained permanent burns on their heads and lost hair.);
competence (are the staff knowledgeable and in possession of skills required to deliver
good service); communication (how well has the company explained its service);
courtesy (is the staff polite, considerate and sensitive to customers?); responsiveness
(are staff willing and quick to deliver the service?); and, tangibles (does the appearance
of staff, the physical environment and other tangible representations of the service
reflect quality?).

To achieve the desired high level of service quality, internal marketing, integrated
marketing, top management commitment to quality, agreed set standards of high
quality, a service performance monitoring and evaluation system, and customer focus
(catering for both internal and external customers) are prerequisites. Where gaps are
evident the organization has to address the gaps e.g. lack of appropriate skills and
courtesy should be addressed through training.

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References

Philip Kotler (2000), Marketing Management, 10th Edition,

Prentice Hall International.

Philip Kotler et al (2002), Principles of Marketing, Third European

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 Edition, Financial Times/Prentice Hall.

Lovelock, C. & Gummesson, E.2004.Whither Services Marketing?

In Search of a New Paradigm and Fresh
Perspectives Journal of Service Research,
7(1), 20-41

Zeithaml, V.A., Parasuraman, A. & Berry, L.L. 1985, Problems and

Strategies in Service Marketing. Journal
Of Marketing, 49(2).Spring 33-46

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