Lesson Note

Subject: Marketing

Topic: Marketing of Services

Lesson Objective: by the end of the lesson, the learners should be able to:

  1. Explain the meaning of services
  2. State the characteristics of services.
  3. Classify services
  4. Identify marketing strategies for service industries.
  5. State the challenges faced by the service industry.

Lesson Summary/Discussion

A service is an act or performance offered by one party to another. Although the process may be tied to a physical product, the performance is essentially intangible and does not normally result in ownership of any of the factors of production.
Services are economic activities that create value and provide benefits for customers at specific times and places, as a result of bringing about a desired change in or on behalf of the recipient of the service.

Service organisations range in size from like huge international corporations like airlines, banking, inSurance, telecommunications, hotel chains and freight transportation to a vast array of locally owned and operated small businesses, including restaurants, laundries, taxis, opticians and numerous business-to-business services.


There are five characteristics of a service:
1. Lack of Ownership: When you
buy a product you become its owner
be it a pencil, book, shirt, refrigerator or a car. In the case of service, you may pay for its use but you never own it. You can not own a service and you can not store a service like you can store a product.
Services are used or hired for a
period of time. For example when
you buy an aeroplane ticket to fly to
abroad, you are buying a service
which will start at the beginning of
the flight and finish at the end of the
flight. You can not take the aeroplane flight home with you.

2. Intangibility: When you buy an item, let’s say perfume or soap for example, you can see , feel, touch, smell and also check its effectiveness in cleaning. But when you pay fees for a term in college, you are paying for the benefit of deriving knowledge and education which is delivered to you by teachers. You cannot hold or touch a service unlike a product. This is
because a service is something that
customers experience and experiences are not physical

3. Inseparability: Services cannot be
separated from service providers. A
product can be taken away, from the
producer but a service can not be
taken away as it involves the service
provider or its representatives doing
something for the customer. For example, a company selling ironing services needs the company to iron the clothes for you.

4. Perishability: Services last a specific time and cannot be stored like a product for later use. For example, an interior designer will design a property once. If you would like to redesign the house another time, you will need to purchase the service again.

5. Heterogeneity: Firms have
systems and procedures to ensure
that they provide a consistent
service but it is very difficult to make each service experience identical. For example, two identical plane journeys may feel different to the passengers due to circumstances beyond the airline’s control such as weather conditions or other passengers on the plane.


A classification of services is useful
because of the great diversity of service institutions. If service marketers are to develop marketing strategies, they must know where their services fit in relation to competition and to consumers need.
Services in business can be categorised into two groups. The first category is products supported

services. In this situation, the wide range of service elements that accompany the physical product are frequently as important as the technical solution offered by the product itself. The best example is
that of consultancy services associated with the sales of computers and other technical products. The second category is pure services; those that are marketed in their own right without necessarily being associated with a physical product. These include insurance, consulting, banking, accounting and travel booking services


Marketing strategy is a long-range plan that guides the efforts of all marketing personnel. Marketing strategies should not be confused with marketing goals. The marketing goal of an organization is to satisfy customers and other members of the
public in exchange for a profit or
acceptable revenue/cost ratio. The
marketing strategy on the other hand, is a particular plan for achieving that goal. Two or more service firms might have identical marketing goals, but use different marketing strategies for reaching that goal.
Therefore, marketing strategy is based
upon goals.
The most successful organizations are
those that take strategic marketing
seriously and strive very hard to have
competitive edge or advantage.

Marketing strategy is a single statement indicating the general route to the achievement of the objective sometimes. However, it is very specific and quantitative. Shaping marketing strategies for services, the marketers must often face a great number of choices and options, which if adopted will guarantee their success, these are:

  • The resources available need to be identified.
  • The competitors marketing strategies.
  • The competitive size of organization and position.
  • The coordination of the tactics into an integrated cohesive whole.
  • The character of the economy/environment.
  • The competitive size of organization and position.
  • The coordination of the tactics into an integrated cohesive whole.
  • The character of the economy/environment.


It is a challenging task to manage a service or product industry. These challenges however are different and unique for each industry. Some of the challenges that are faced while managing, growing and making profit from a service industry are discussed below, these factors do not readily apply to the product industry.

1. Services Are Intangible: and so
customers cannot see or hold them
before they buy it. Buyers are therefore uncertain about the quality of service and feel they are taking a risk. The buyer is unable to conceptualize and evaluate a beforehand. From the service seller’s perspective he finds it challenging to promote, control quality and set the price of the service he provides. Unlike products the intangible nature of service causes difficulties to both
client and the firm.

2. Inability to Define Quality: Defining and improving quality in
the service industry is a major
challenge. Unlike products very
often services are produced and
consumed simultaneously. As a
result service quality management
faces challenges that the product
industry has never come across. In
the product industry the manufacturer gets ample opportunity to test his products before they reach the market. In case of a quality issue the problem is taken care of during the quality check and customer satisfaction is taken care of. However, during service production the customer is right in front. To guarantee customer satisfaction in this scenario is a major challenge.

3. Trust: In the case of the service industry, the customer first needs to develop trust in the service organization before buying their services. The client often gives more important attention to the amount of faith he has on the service organization than the services being offered and their value proposition.

4. Competition: Service industry faces competition not only from fellow service industry but also from their clients who often question themselves whether or not they should engage a service at all.

5.Tidious Task is Involved: Most of the product companies have dedicated sales staff, while in the service industry the service deliverers often do the selling. Coordinating marketing, operations and human resource efforts is a tedious task.

6. Passion works for the service industry: More of the passion, spirit and desire among the service staff is more on the revenue generation and success generated every day. There is a direct correlation between staff passion and financial success and similarly lack of passion leads to failure in the service industry. Staff members need to be constantly motivated and efforts have to be intensified to sustain employee commitment.

7. Requires Effective Communication: While testing new services is a constant challenge, communicating about these services simultaneously is also not easy.

8. Difficulty in Setting Price: Setting prices does not come easily for service industry.

9. Standardization versus personalization is another major issue the service industry has to face.

See previous lessons in Marketing

Lesson Evaluation/Test

  1. Define the term service.
  2. State the characteristics of services.
  3. What are the classes of service?
  4. Mention the marketing strategies used by service industries.
  5. What are the challenges faced by the service industry?

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