Why is Service Marketing Important?

1. Service-Based Economies
 Growth of Service Industries: Services have become a major
contributor to economies worldwide. By 2014, the service sector
accounted for over 80% of total employment and 81% of the GDP in
the U.S.
 Global Trade in Services: Exports of services from the U.S. increased
by 84% since 2000, leading to a $227 billion trade surplus in 2015. The
U.S. ranks first in global service sales.

2. Service as a Business Imperative

 Transition from Products to Services: Companies across various
industries (e.g., GE, IBM, Procter & Gamble) have begun to focus on
service-led growth as product markets become saturated and
competitive.
 Examples:
o Xerox: Shifted from traditional printing services to document
management.
o PetSmart: Growth was driven by services like pet hotels and
grooming.
o Procter & Gamble: Expanded into services with brands like Mr.
Clean and Tide Spin.
Why the Shift to Services?
1. Commoditization of Products: Services allow for customized offerings,
adding value for customers.
2. Customer Demand: Customers increasingly seek integrated solutions
combining products and services.
 3. Profit Margins: Services tend to have higher margins and foster
customer loyalty.
4. Market Differentiation: In competitive markets, superior services set
businesses apart.
Challenges of Transitioning to Services
 Cultural Shifts: Companies moving from product-focused to service-
focused businesses often struggle with organizational culture,
expertise, and sales channels.
 Need for New Strategies: Success in service industries requires unique
marketing and management approaches compared to traditional
manufacturing.

3. Deregulated Industries and Professional Services

 Impact of Deregulation: Industries like airlines, banking, and
telecommunications, once tightly controlled by governments, now face
competitive markets, requiring more customer-oriented and
sophisticated marketing strategies.
 Professional Services: Lawyers, doctors, accountants, etc., now face
increasing competition and have embraced marketing strategies to
differentiate and improve service quality.

4. Service Marketing is Different

 Unique Challenges: Marketing in service businesses differs from
goods-based industries. Services involve human performance, making
consistent quality harder to achieve.
 New Concepts and Approaches: The unique nature of services has
driven the development of new marketing strategies specifically
tailored for service businesses.
5. Service Equals Profits
 Service-Driven Success: Companies focusing on customer service (e.g.,
Leonard Berry’s featured firms) have shown long-term profitability and
success.
 Service-Profit Chain: Research links internal service and employee
satisfaction to customer loyalty and profits.
 Customer Satisfaction: Firms with high customer satisfaction
outperform major stock indexes (e.g., S&P 500).

Paradoxes of Technological Products

1. Control/Chaos
o Description: Technology often provides tools for users to
manage their environments and tasks efficiently. However,
when systems become overly complex, malfunction, or demand
constant attention, they can create chaos rather than order.
o Example: A smart home system lets users control lights, security,
and climate remotely, offering convenience. However, if the
system crashes or is hacked, it can cause significant disruption,
such as being locked out of your home or losing data.
2. Freedom/Enslavement
o Description: Technology enables freedom by facilitating
mobility, access to information, and flexible work options.
Conversely, constant connectivity can create an inability to
disconnect, leading to stress and overdependence.
o Example: Smartphones allow employees to work from
anywhere, enabling greater flexibility. However, the expectation
to be available 24/7 for emails or calls can lead to burnout and
reduced personal time.
3. New/Obsolete
o Description: Technology excites with innovation, providing
cutting-edge solutions to modern problems. Yet, the rapid pace
 of development can make devices and systems obsolete quickly,
pressuring users to upgrade frequently.
o Example: The release of new smartphones with advanced
features drives demand. However, older models lose support
(e.g., no software updates), forcing users to replace them even if
they still function well.
4. Competence/Incompetence
o Description: Technology empowers individuals to learn new
skills, improve productivity, and access resources. However, the
complexity of some systems can overwhelm users, creating
feelings of incompetence.
o Example: Financial apps like QuickBooks help small business
owners manage accounts effectively. Yet, users unfamiliar with
such software may find it difficult to navigate, leading to errors
and frustration.
5. Fulfills/Creates Needs
o Description: Technology fulfills existing needs, such as
convenience and entertainment, but it also creates new desires,
some of which may be unnecessary or counterproductive.
o Example: E-commerce platforms like Amazon fulfill the need for
accessible shopping. However, they often use algorithms to
suggest additional items, creating a desire to purchase products
users hadn’t initially considered.
6. Assimilation/Isolation
o Description: Technology fosters community and collaboration by
connecting people across distances. At the same time, it can
lead to isolation as individuals replace in-person interactions
with virtual ones.
o Example: Social media platforms enable users to share
experiences and connect with friends worldwide. Yet, excessive
use can lead to reduced face-to-face interactions, causing
feelings of loneliness or social disconnection.
7. Engaging/Disengaging
o Description: Some technologies are designed to engage users
and encourage active participation. However, overuse can result
 in disengagement from other aspects of life, such as work or
relationships.
o Example: Fitness tracking apps like Fitbit engage users with
gamified features to encourage physical activity. However, the
same user might become disengaged from family time due to an
obsession with hitting daily step goals.

Services vs. Goods in Terms of Search, Experience, and Credence

Qualities

1. Services Are Intangible, Making Search Qualities Harder to Assess

 Goods: Search qualities like color, size, and material are easily evaluated
because goods are tangible and can often be inspected before purchase.
 Services: These are intangible, so search qualities (e.g., price, reputation,
credentials) are limited and often harder to evaluate in advance.
o Example: A hair salon can only show photos or describe their
services; the actual experience comes later.

2. Services Rely Heavily on Experience Qualities

 Goods: Experience qualities are present but often secondary to search
qualities, especially for durable goods.
 Services: Most services are evaluated through experience because the
customer interacts with the service provider during or after consumption.
o Example: Dining at a restaurant or staying at a hotel involves
assessing the experience in real time.
o Challenge for services: Customers might hesitate to purchase a
service they cannot fully evaluate beforehand, increasing perceived
risk.

3. Services Often Involve More Credence Qualities

 Goods: Credence qualities in goods are rare, as most products have
tangible attributes or performance indicators that are eventually
discernible (e.g., a car's durability after driving it for a year).
 Services: Many services involve high levels of credence qualities because
outcomes are hard to judge, even post-consumption.
o Example: A medical procedure or tax advice might appear
satisfactory, but the customer lacks the expertise to confirm its true
effectiveness.
o Challenge for services: Customers must trust the provider based on
reputation, credentials, or referrals, as they cannot easily verify the
service quality themselves.

Key Characteristics of Services That Influence These Qualities

1. Intangibility: Services cannot be touched or inspected before purchase,
making search qualities less prominent.
2. Inseparability: Services are often produced and consumed simultaneously,
which emphasizes experience qualities.
3. Perishability: Services cannot be stored, making trial or sampling options
less feasible, further heightening reliance on trust for credence qualities.
4. Variability: Service quality may depend on who delivers it and under what
circumstances, making evaluation more subjective.

Marketing Implications for Services

1. Search Qualities:
o Focus on providing as much pre-purchase information as possible
(e.g., testimonials, certifications, guarantees).
o Emphasize visible cues like professionalism, branding, and
environment.
o Examples: Posting staff credentials at a legal office or customer
reviews for an online tutoring service.
2. Experience Qualities:
o Encourage trial use, such as free initial consultations or money-back
guarantees.
o Highlight customer experiences through storytelling, reviews, and
referrals.
 o Examples: Allowing customers to tour a gym before joining or
offering sample spa treatments.
3. Credence Qualities:
o Build trust through credibility markers like accreditations,
certifications, and affiliations.
o Focus on long-term relationships to enhance trust and reduce
perceived risks.
o Examples: A healthcare provider emphasizing board certifications or
a law firm advertising successful case outcomes.