76  Service marketing

76.1 Concept of a Service

A service is “any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything” (Kotler). Services account for over 53 % of India’s GDP (2024). Service marketing differs from goods marketing because of four core characteristics — IHIP: Intangibility, Heterogeneity (Variability), Inseparability, Perishability — and uses an expanded 7 Ps mix with the additional People, Process, Physical evidence.

76.2 IHIP — Distinctive Characteristics of Services

TipService Characteristics (IHIP)

Characteristic	Implication
Intangibility	Cannot be seen, touched, or smelled before purchase — use tangibles (uniforms, decor) as cues
Inseparability	Produced and consumed simultaneously — provider matters
Heterogeneity / Variability	Quality varies by who, when, where — needs standardisation, training
Perishability	Cannot be inventoried — manage demand-supply (yield management)

76.3 The Services Marketing Triangle (Bitner)

TipThree Forms of Marketing

• External marketing — company → customer (promises).
• Internal marketing — company → employees (enabling).
• Interactive marketing — employees ↔︎ customers (delivering).

76.4 Expanded Services Marketing Mix — 7 Ps

TipThe 7 Ps of Service Marketing

• Product / service offering — core + peripheral; service blueprint.
• Price — value pricing, dynamic pricing, member pricing.
• Place / distribution — branch, web, mobile, agents, kiosks.
• Promotion — advertising, PR, personal contact, referrals.
• People — staff selection, training, motivation, empowerment.
• Process — flow of activities, service blueprinting, queue management.
• Physical evidence — décor, ambience, layout, uniforms, brochures, signage.

76.5 Service Classifications

TipLovelock’s Service Process Classifications

Type	Object	Example
People-processing	Human body	Healthcare, hair-cut
Possession-processing	Goods	Repair, dry-clean
Mental-stimulus processing	People’s minds	Education, broadcasting
Information-processing	Intangible assets	Banking, insurance, legal

76.6 Service Quality

76.6.1 SERVQUAL Model — Parasuraman, Zeithaml & Berry (PZB, 1988)

Five dimensions — mnemonic RATER:

TipSERVQUAL — RATER Dimensions

• Reliability — perform service dependably and accurately.
• Assurance — knowledge and courtesy of employees; inspires trust.
• Tangibles — appearance of facilities, equipment, personnel.
• Empathy — caring, individualised attention.
• Responsiveness — willingness to help and prompt service.

76.6.2 Five Service Quality Gaps Model

TipGaps Model (PZB)

• Gap 1 — Knowledge gap (between customer expectations and management perception).
• Gap 2 — Standards gap (between management perception and service quality specifications).
• Gap 3 — Delivery gap (between specs and actual delivery).
• Gap 4 — Communication gap (between delivery and external communication).
• Gap 5 — Service gap — between expected and perceived service (= sum of 1-4).

76.6.3 Other Quality Tools

TipOther Quality Tools

• SERVPERF (Cronin & Taylor) — service performance only.
• Service Blueprinting — Shostack 1984 — flow chart with line of visibility.
• Critical Incident Technique (CIT).
• Mystery shopping.
• NPS — Net Promoter Score (Reichheld 2003).
• Six Sigma in services.

76.7 Managing the Service Encounter

The service encounter (Moment of Truth, MOT — Jan Carlzon, SAS Airlines) is the period during which the customer directly interacts with a service. Marketers manage MOTs through:

TipEncounter Management

• Training & empowerment.
• Recruitment and selection of right people.
• Internal marketing & culture.
• Service recovery — recovery paradox: a well-handled failure can boost loyalty.
• Service guarantees — bold, unconditional.
• Customer co-creation — self-service, IKEA-style.

76.8 Demand-Supply Management

Because services are perishable, capacity-demand mismatches must be managed:

TipDemand-Supply Strategies

• Shift demand — differential pricing, off-peak promotions, reservations.
• Adjust supply — part-time staff, cross-train employees, share capacity, customer participation, schedule downtime in low season.
• Yield management / Revenue management — airlines, hotels.

76.9 Service Marketing in India

TipMajor Indian Service Sectors

• IT-ITES — TCS, Infosys, Wipro, HCL, Tech Mahindra; ~ USD 250 bn exports (2024).
• Banking and financial services — RBI, IRDAI, SEBI regulated.
• Healthcare — Apollo, Fortis, Max; Ayushman Bharat 2018.
• Education — IITs, IIMs, EdTech (Byju’s, Unacademy).
• Hospitality & tourism — Taj, Oberoi, Marriott; Incredible India campaign.
• Telecom — Reliance Jio, Airtel, Vi.
• Transport and logistics — IndiGo, IRCTC, Delhivery, BlueDart.
• Consulting and Professional services — Big 4, McKinsey, BCG, Bain.
• E-commerce and platforms — Amazon, Flipkart, Zomato, Swiggy, Ola.

flowchart TB
  S[Service Marketing] --> I[Characteristics<br/>IHIP]
  S --> M[7 Ps Mix<br/>+ People · Process · Physical]
  S --> T[Triangle<br/>External · Internal · Interactive]
  S --> Q[Quality<br/>SERVQUAL · 5 Gaps · Blueprint]
  S --> E[Encounter<br/>MOTs · Recovery · Guarantees]
    classDef default fill:#003366,color:#ffffff,stroke:#ffcc00,stroke-width:3px,rx:10px,ry:10px;

NoteDistractor warning

PYQ trap: IHIP = 4 service characteristics. SERVQUAL — 5 dimensions, RATER. PZB 1988 developed the model. MOTs — Jan Carlzon. Blueprinting — Lynn Shostack 1984.

76.10 Practice Questions

Q 01IHIPEasy

IHIP refers to:

• AIntangibility, Heterogeneity, Inseparability, Perishability
• BInternal, Hybrid, Interactive, Personal
• CIntensity, Hygiene, Image, Promise
• DIndustry, Health, Insurance, Person

View solution

Correct Option: A

**IHIP** — four service characteristics.

Q 027 PsEasy

Extra 3 Ps in services marketing:

• APeople, Process, Physical evidence
• BPlace, Promotion, Price
• CProduct, Promotion, People
• DPlace, People, Promotion

View solution

Correct Option: A

**Booms & Bitner 1981**.

Q 03SERVQUALMedium

SERVQUAL model has how many dimensions?

• A3
• B4
• C5
• D7

View solution

Correct Option: C

**5 — RATER** (Reliability, Assurance, Tangibles, Empathy, Responsiveness).

Q 04PZBMedium

SERVQUAL was developed by:

• AKotler
• BParasuraman, Zeithaml, Berry
• CCronin & Taylor
• DShostack

View solution

Correct Option: B

**PZB 1988**.

Q 05MOTMedium

"Moment of Truth" concept is popularised by:

• AJan Carlzon (SAS)
• BKotler
• CLevitt
• DDrucker

View solution

Correct Option: A

**Jan Carlzon** of SAS Airlines.

Q 06BlueprintHard

Service Blueprinting was given by:

• ABerry
• BLynn Shostack (1984)
• CKotler
• DBitner

View solution

Correct Option: B

**Lynn Shostack** — HBR 1984.

Q 07PerishMedium

Empty airline seats illustrate which characteristic?

• AIntangibility
• BInseparability
• CPerishability
• DHeterogeneity

View solution

Correct Option: C

**Perishability** — cannot be stored.

Q 08TriangleMedium

Services marketing triangle (Bitner) includes:

• AExternal, internal, interactive marketing
• BPrice, place, promotion
• CStrategy, structure, system
• DPeople, process, evidence

View solution

Correct Option: A

External, Internal, Interactive marketing (employees + customers).

Q 09Gap 5Hard

In Gaps Model, Gap 5 represents:

• AKnowledge gap
• BService gap (between expected and perceived)
• CCommunication gap
• DStandards gap

View solution

Correct Option: B

**Gap 5** = expected vs perceived = sum of Gaps 1-4.

Q 10NPSMedium

NPS — Net Promoter Score — was proposed by:

• AReichheld (2003)
• BKotler
• CBerry
• DCronin

View solution

Correct Option: A

**Reichheld 2003** — "One Number You Need to Grow".

Q 11India GDPMedium

Approximate share of services in India's GDP (2024):

• A15 %
• B30 %
• C~ 53 %
• D75 %

View solution

Correct Option: C

Services ~ **53 %** of India's GDP.

Q 12LovelockHard

Lovelock classifies hospital surgery as:

• APeople-processing
• BPossession-processing
• CInformation-processing
• DMental-stimulus processing

View solution

Correct Option: A

**People-processing** — acts performed on human body.

Q 13SERVPERFHard

SERVPERF was given by:

• APZB
• BCronin & Taylor
• CKotler
• DBerry

View solution

Correct Option: B

**SERVPERF (1992)** — performance-only alternative.

Q 14YieldMedium

Yield management is mainly used by:

• AAirlines and hotels
• BFMCG
• CConstruction
• DAgriculture

View solution

Correct Option: A

**Revenue management** — airlines, hotels, car rental.

Q 15RecoveryMedium

"Recovery paradox" means:

• ACustomer loyalty rises after a well-handled failure
• BCustomers never forgive
• CRecovery fails always
• DCustomers leave silently

View solution

Correct Option: A

**Recovery paradox** — service recovery done well boosts satisfaction beyond original level.

Q 16IntangEasy

"Service cannot be touched before purchase" refers to:

• AIntangibility
• BVariability
• CInseparability
• DPerishability

View solution

Correct Option: A

**Intangibility**.

Q 17Physical evidenceMedium

Bank's décor and uniform reflect which P?

• APlace
• BPhysical evidence
• CProcess
• DProduct

View solution

Correct Option: B

**Physical evidence** — tangible cues for an intangible service.

Q 18CITHard

Critical Incident Technique is used to:

• ASet advertising budget
• BCollect specific positive/negative service incidents from customers
• CForecast sales
• DTest prices

View solution

Correct Option: B

**CIT** — qualitative method for service quality.

Q 19RATERMedium

"A" in RATER stands for:

• AAccess
• BAssurance
• CAwareness
• DAdequacy

View solution

Correct Option: B

**Assurance** — knowledge and courtesy.

Q 20MatchMedium

Match characteristic with implication:

	Characteristic		Implication
(i)	Intangibility	(a)	Use tangible cues
(ii)	Inseparability	(b)	Provider matters
(iii)	Variability	(c)	Standardise & train
(iv)	Perishability	(d)	Demand-supply management

• A(i)-(a), (ii)-(b), (iii)-(c), (iv)-(d)
• B(i)-(b), (ii)-(a), (iii)-(d), (iv)-(c)
• C(i)-(c), (ii)-(d), (iii)-(a), (iv)-(b)
• D(i)-(d), (ii)-(c), (iii)-(b), (iv)-(a)

View solution

Correct Option: A

Direct mapping.

76.11 Quick Recall

ImportantQuick recall

• Services in India: ~ 53 % of GDP; IT-ITES, Banking, Healthcare, Tourism.
• IHIP characteristics: Intangibility, Heterogeneity, Inseparability, Perishability.
• 7 Ps: 4 Ps + People, Process, Physical evidence (Booms & Bitner 1981).
• Services marketing triangle: External / Internal / Interactive.
• SERVQUAL — RATER (PZB 1988); 5 dimensions + 5 Gaps; SERVPERF = performance only (Cronin & Taylor 1992).
• Blueprinting — Lynn Shostack 1984; MOTs — Jan Carlzon (SAS).
• Recovery paradox; yield management in airlines/hotels.
• Lovelock 4 categories: People / Possession / Mental / Information processing.
• NPS — Reichheld 2003.