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).

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

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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

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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

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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)

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.

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.

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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