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Lesson 7 of 8Introduction to Marketing
Unit 1 · Lesson 7 of 8

Marketing Services: The Extended Mix

Services cannot be touched, stored or separated from the people who deliver them, so service marketers add people, process and physical evidence to the 4 Ps and manage quality and capacity with special care.

5 min read11 practice questionsAsk AI about this →

Key things to remember

  1. 1Four characteristics of services: intangibility, inseparability, variability and perishability.
  2. 27 Ps of services: product, price, place, promotion, plus people, process and physical evidence.
  3. 3Service quality = perceived service compared with expected service; RATER: reliability, assurance, tangibles, empathy, responsiveness.
  4. 4Gaps model: knowledge, standards, delivery and communication gaps together create the customer gap.
  5. 5A service blueprint maps customer actions, onstage and backstage employee actions and support processes, separated by the lines of interaction and visibility.
  6. 6 yield pricing and reservations fight perishability.

A hypothetical Muskoka resort has 80 rooms. On a quiet Tuesday in November, 30 of them sit empty. Unlike a sweater in a store, an empty room cannot be put back on the shelf and sold next week: Tuesday night's room is gone forever, along with the money it could have earned. And when a guest does check in, the resort is not handing over an object. It is selling an experience made by the front-desk clerk, the housekeeper and the cook, live, in front of the customer. Services make up most of Canada's economy, from banking and haircuts to streaming and dental care, and they need their own marketing tools because they behave so differently from goods.

What Makes Services Different

CharacteristicWhat it meansMarketing challengeHow marketers respond
IntangibilityCannot be seen, touched or tried before buyingCustomers feel the purchase is riskyShow tangible clues: reviews, photos, guarantees, a professional-looking space
InseparabilityProduced and consumed at the same time, usually with the provider presentThe employee is part of the productHire and train carefully; manage how customers interact with each other too
VariabilityQuality depends on who delivers it, when and whereTwo visits can feel completely differentStandard procedures, checklists, training and customer feedback
PerishabilityCannot be stored for later saleUnused capacity is lost revenueManage demand with pricing and reservations; flex supply with part-time staff
The four characteristics of services. Every service has all four, to different degrees.
GoodsServicesEventsTangibilityPhysical: you can touch,store, and inspect itbefore buyingIntangible: nothing tohold or inspect beforeyou buyMostly an experience,with some tangible extras(tickets, merchandise)PerishabilityCan be kept in inventoryand sold laterCannot be stored: anunused appointment timeis lostHappens on a set date:unsold seats can never besoldInseparabilityMade first, sold later,used apart from the makerProduced and used at thesame time, with theprovider thereProduced and experiencedat the same time, withthe audience thereVariabilityConsistent: factoryquality controlQuality can vary byprovider and by dayEvery event is unique:weather, crowd,performersExamplesSmartphone, sneakers,cerealHaircut, tutoring, bankaccountConcert, schoolfundraiser, sportstournament
Fig 1Goods are tangible and storable; services are intangible and perishable; events are services tied to a single date and place.

The Extended Mix: People, Process and Physical Evidence

Because a service is created in front of the customer, the classic 4 Ps of product, price, place and promotion leave out the things customers judge most. Marketers therefore use an extended mix of 7 Ps. People covers everyone the customer meets, and even other customers: a rude server ruins a perfect meal, and a rowdy group can ruin a quiet spa. Process is the series of steps a customer goes through, from booking to paying, and how long and smooth each step is. Physical evidence is every tangible clue that hints at quality, because the service itself cannot be inspected: the clean waiting room, the uniform, the website, the printed receipt, the online reviews. Customers use these clues to judge something they cannot see before buying.

Extra PWhy it matters for servicesExample: a hypothetical Oakville dental clinic
PeopleStaff are part of the product, so their skill and attitude are the serviceFriendly hygienists trained to explain each step and calm nervous patients
ProcessLong waits or confusing steps lower satisfaction even when the result is goodOnline booking, text reminders, direct billing to insurance, no paperwork at the desk
Physical evidenceTangible clues reduce the risk of buying something intangibleBright, spotless office, visible sterilization area, credentials on the wall, strong Google reviews
Product, price, place and promotion still apply; the three extra Ps manage the live experience.

Service Quality and the Gaps Model

Customers judge service quality by comparing what they expected with what they think they received. If perception meets or beats expectation, they are satisfied. Researchers found that customers look at five dimensions, often remembered as RATER: reliability (doing what was promised, every time), assurance (staff knowledge and courtesy that build trust), tangibles (the physical evidence), empathy (caring, individual attention) and responsiveness (willingness to help promptly). Reliability is usually rated most important. The gaps model explains where poor quality comes from. Each gap is a point where the business loses track of what the customer actually wants, and fixing the earlier gaps is what closes the last one.

  1. Knowledge gap: managers do not know what customers really expect, often because they never ask. Fix: research and feedback.
  2. Standards gap: managers know what customers expect but do not set clear service standards. Fix: written standards, such as "answer the phone within three rings."
  3. Delivery gap: standards exist but staff do not meet them, because of poor training, low staffing or bad tools. Fix: training, staffing and empowerment.
  4. Communication gap: advertising promises more than the business delivers. Fix: promise only what the operation can do.
  5. Customer gap: the overall difference between what customers expected and what they perceived. It closes when the first four gaps close.

Service Blueprints

A service blueprint is a map of a service process that shows every step from the customer's point of view and everything happening behind the scenes to support it. It has horizontal layers. Physical evidence sits at the top, then customer actions, then the line of interaction. Below that line are onstage (frontstage) employee actions the customer can see, then the line of visibility, backstage actions the customer cannot see, and support processes such as software and suppliers. Blueprints help managers find fail points, where things often go wrong, and wait points, where customers stand around. Fixing a fail point backstage, such as a slow ordering screen, can improve the whole experience without the customer ever knowing why.

Layer1. Order2. Pay3. Wait4. Pick up
Physical evidenceMenu board, clean counterTap terminal, receiptSeating, music, pickup screenLabelled cup, lid, sleeve
Customer actionsChooses drink, ordersTaps card or phoneWaits, checks phoneHears name, takes drink
Onstage employee actionsGreets, takes order, suggests a snackConfirms totalSays it will be about 4 minutesCalls name, smiles, thanks customer
Backstage actionsOrder appears on barista screenPayment is processedBarista makes drink (fail point: wrong milk)Restocks cups
Support processesPoint-of-sale softwareBank payment networkEspresso machine, milk supplierInventory system
A simplified service blueprint for a coffee order at a hypothetical café. The line of visibility runs between onstage and backstage actions.

Managing Perishability

Since unsold service capacity disappears, service marketers try to match demand to capacity. On the demand side, yield management (also called revenue management) changes prices to fill capacity at the highest total revenue: airlines and hotels charge more on busy dates and less on quiet ones, and cinemas offer cheaper Tuesday tickets. Off-peak pricing shifts some customers to quiet times. Reservations and appointments spread demand out and let the business plan staff, and some airlines and hotels overbook slightly because they know a few customers will not show. On the supply side, businesses hire part-time staff for peaks, cross-train employees, and share equipment. The measure that tracks all of this is capacity utilization: the percentage of available capacity actually sold.

Units of capacity can be seats, room-nights, appointment slots or tee times.

Worked examples

Reveal one step at a time and try to beat it to the next line.

Example 1
A hypothetical Collingwood ski school sells group lessons. Explain how each of the four service characteristics affects it, and suggest one response for each.
Example 2
A hypothetical Niagara Falls hotel has 120 rooms. In a 30-night month it sells 2,520 room-nights at an average of 150 dollars. Calculate capacity utilization and the revenue lost on empty rooms.
Example 3
A hypothetical Peterborough theatre has 400 seats. At a single price of 60 dollars it sells 250 seats. With yield pricing, it sells 90 of 100 front seats at 85 dollars and 260 of 300 other seats at 50 dollars. Compare revenue and capacity utilization.
Example 4
A hypothetical Oakville dental clinic advertises "No waiting, ever." Patients regularly wait 25 minutes past their appointment time, and online reviews are falling. Use the gaps model to diagnose and fix the problem.

Where marks get lost

  • Listing perishability as "the service goes bad." It means unused capacity cannot be stored and sold later, such as an empty seat on a flight that has left.
  • Confusing people and process. People are the staff and customers involved; process is the sequence of steps and how smooth and fast they are.
  • Treating physical evidence as decoration. For an intangible service, the space, uniforms, website and reviews are how customers judge quality before buying.
  • Blaming front-line staff for every service failure. The gaps model shows many failures start with managers who did not research expectations or set realistic standards.
  • Calculating capacity utilization with the wrong base, such as dividing by rooms instead of room-nights. Capacity available must cover the same time period as capacity sold.

Flashcards 10

Intangibility
Inseparability
Variability
Perishability
+ 6 more

Practice

1
Match each service characteristic to the situation that shows it.
Intangibility
Inseparability
Variability
Perishability
2
A spa redesigns its check-in so guests book online, skip the desk and receive a text when the room is ready. Which extra P is it improving?
3
For an accounting firm, which is the best example of physical evidence?
4
A gym's ads promise "Never wait for equipment," but members wait every evening. Which gap is most directly shown?
5
Which practice is designed mainly to manage perishability?
6
A hypothetical golf course has 64 tee times available each day. Over a 7-day week it books 336 tee times. What is its capacity utilization, in percent?
%
7
A hypothetical 180-seat regional flight leaves with 153 passengers. If each empty seat could have sold for 120 dollars, how much potential revenue was lost?
dollars
8
A hypothetical hair salon has 4 stylists, each with 8 one-hour appointment slots a day. On Monday it books 20 appointments. What is Monday's capacity utilization, in percent? Round to one decimal place.
%
9
Put the layers of a service blueprint in order from top to bottom.
  1. 1Support processes
  2. 2Backstage employee actions
  3. 3Onstage employee actions
  4. 4Physical evidence
  5. 5Customer actions
10
Which service characteristic means that unused capacity, like an empty hotel room tonight, cannot be stored and sold later?
11
Customers rate one RATER dimension as most important: doing what was promised, accurately, every time. Name it.

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