The Services sector in India is growing at a rapid clip and many businesses that sell products are introducing services for consistent revenue. While the global economy thrived on manufacturing and products in the last century, it is highly dependent on services today. India’s services sector contributed 61% to its gross domestic product in 2015-16 and is growing at 10 percent. According to Statistics Times, Services is the largest sector in India. The Services sector accounts for 53.66% of India’s GVA (Gross Value Added) of 137.51 lakh crore Indian rupees. GVA is the measure of the value of goods and services produced in an area, industry or sector of an economy.
Some of the Services led industries in India are: Information technology (IT), Telecom, Travel & Tourism, Media & Entertainment, Education, and Healthcare. But one should not limit it only to those sectors as almost every industry offers services. Customers are becoming a key focus for business. Delivering better customer experiences through services is now a top priority for businesses.
As more businesses turn towards services, they face new challenges on the Marketing front. Marketing a service to consumers or other businesses is completely different from marketing a product. In this article I shall explain the concept of Service Marketing.
Product vs Service
The service companies or service providers must use service marketing to reach out to consumers. But the challenges of marketing services are different from the challenges of marketing products.
There are four characteristics that distinguish services from products:
Intangibility: It is easier to sell a product than a service. A product is tangible or physical. When customers can see a product and examine its shape, colour, features, size, the quality of materials used – they can immediately make a purchase decision. Indian consumers like to ‘feel’ the product before they buy, especially if it is clothing or personalised products.
However, a service is intangible – consumers cannot feel or own it like a product. So it takes longer to convince them. As they say in marketing, the entry point to the ‘funnel’ takes longer. You are not selling something that a customer can own – it is about selling something that a customer consumes. Take Tourism for instance. That industry sells experiences. The only way a customer can preview it is by seeing photographs, reading reviews online or by listening to other people who have travelled to those destinations.
Education is also a service. The various utilities you consume – electricity, gas, telecom, internet – are all services. Apart from pricing, customers choose a service provider based on quality of service.
Challenge: How does one sell or market a service that cannot be shown to or owned by customers?
Recommendation: There are special approaches to overcome the challenge of selling a service. One is customer testimonials. You can take written testimonials from your existing customers and put these on your business website and in your brochures. Use customer photos. Customer reviews on established websites also work well. An example is reviews on the TripAdvisor website. These days I see a lot of video testimonials. If they are well made with slick production values, these will receive a lot of views and go viral. Also use social media and social media influencers who have followers that are your potential customers.
Inseparability: A product can be bought from different channels: online, in a mall, in a convenience store etc. But a service has one point of purchase. You deal directly with the seller or his distributor. And you go to that same point every time you need that service. For example, when you need a haircut, it’s highly likely that you go to the same salon every month. You may go a step further and demand that the same person does your hair (because he/she knows your preferred style). Hence the relationship between the consumer and the service provider is inseparable.
Challenge: How can the service provider offer the best service, in the most customised manner, for thousands or millions of customers?
Recommendation: When you are dealing with a few customers, it is possible to get to know them well. You will know their preferences and their level of satisfaction with your services. But that may not be possible when there are thousands of customers. So how do you still achieve this? The Marriott Group of Hotels, for instance, knows the preferences and tastes of all its customers, worldwide. So if you are a regular customer, chances are they will give you the same kind of room, or have your favourite cigars and flowers in your room, no matter which Marriott hotel you stay in, anywhere in the world! How does the Marriott Group know? The answer is systems and processes. Customers preferences and transactions are recorded in a master data base that is accessible to any hotel in the Marriott chain, anywhere in the world. So when you make a reservation, they already know you, and set your room up accordingly! And their customers love that. But just don’t overdo it, as it may be an invasion of privacy.
Perishability: There are perishable and non-perishable products. Food items are perishable and have a shorter shelf life, vendors know they must sell these items within a few hours or days so they offer discounts to clear stocks. If they are unable to sell their stocks, there is wastage and revenue loss.
Services are perishable. The service provider needs to sell maximum capacity in order to be profitable. Let’s take the example of an airline. If a flight is going half empty, the revenue collected from ticket prices will not suffice to cover the operational costs. So airlines use different strategies for filling their airplanes. They might club flights for a particular route or use code sharing arrangements with partner airlines or join an airline alliance like Star Alliance. So it is a matter of balancing demand with supply. If you can do that, then you minimise your business losses and increase your profitability. Of course, you may not always be able to do this. There are periods of demand (like the holiday season) and then there are periods when sales dip due to low demand.
Challenge: How can the service provider create maximum utilisation for its service?
Recommendation: There are a couple of marketing strategies to counter periods where there is less demand. Some of the approaches are aggressive promotion, discounts, loyalty programs with points, and sales. Marketers create a sense of false urgency and false demand, causing people to rush out to buy services. They do this by offering discounted pricing for a limited period.
Variability: A product might have little variability, because every unit of that particular model is built to a specification or design created by a manufacturer. If you buy a particular model of a car, and your friend buys the same model, it is likely that the two will be similar in most aspects. Of course, the colours may be different and there will be differences in the customised options, like the material used for the seating upholstery.
But with a service, there is a lot of variability. There will be variations depending on who offers the service, and at what location.
Challenge: How can a service be standardised so that the customer gets the same quality, regardless of location or point of sale?
Recommendation: This can be achieved through standard processes and frequent audits. Customer surveys and feedback provide inputs. Frequent improvements, in response to customer feedback, can lead to increased customer satisfaction. A good example is McDonalds. A Big Mac burger tastes the same at any McDonalds outlet, anywhere in the world (I experienced it). McDonalds uses the same equipment in all their kitchens and the same processes and recipes for making their burgers – at all their global outlets.
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Takeaways and Summary
We have seen that the challenges presented by service marketing are quite different from product marketing. The core challenges for service marketing are Intangibility, Inseparability, Perishability and Variability. It is difficult to sell something a consumer can’t own or see. And there tends to be a lot of variability in a service.
The key to solving these four challenges is good systems and processes. Pay attention to customer feedback, online reviews and conversations on social media. And act quickly.
The main thing for you, as a service marketer, is customer satisfaction, and then profitability.
If your customers are happy, they will tell others about your service.
And the profits will come!
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