Seven Ps of Services Marketing

Posted: 09/1999

Seven Ps of Services Marketing
By Michael R. Blumberg

The marketing mix, one of the most basic elements of marketing, states that there are four principles inherent to any marketing program: product, price, promotion and placement. These four principles of marketing were developed to explain how decisions affecting the marketing mix impact the success or failure of the marketing program. Successful service marketers realize the four "Ps" are highly oriented toward marketing products and find it challenging to apply the four Ps to marketing services.

Service businesses do not have a product per se, as defined in terms of an objective form, fit and function. Services are intangible and, while they have a form, their fit and function often can be very subjective. Without a clear product definition, promotion of a service becomes even more challenging. Placement has a broader connotation to service marketing as well. Services can be purchased from one source, but delivered by another service provider. Many times the point of service purchase is a different location than the point of delivery. In addition, service delivery can be provided from the original vendor, or from a third party.

Without the concepts of product, promotion and placement, service marketers are left only with price as a variable to manage in the traditional marketing mix. Studies have found that when marketers talk about service simply in terms of form and cannot talk to the broader issues of product, promotion and placement, customers tend to look only at price, and often will use price as the only criterion for selecting a service provider.

Quite often, less experienced service marketers will attempt to define a service product only in terms of the skill and capabilities of the provider. In these situations, the marketer basically promotes skills and capabilities which, in substance, boil down to the provision of people's time. Arguments and/or differences of opinion naturally will emerge as to length, value and output of time. Time itself is a very subjective issue, which can be argued or disputed by the customer.

More experienced service marketers realize that services marketing issues revolve around seven, not four, principles.

The seven marketing principles of the service paradigm are:

1. Promise (also referred to as a portfolio), which can be defined as the offer the service provider makes to the customer;

2. Process, which describes processes and procedures the service provider will utilize to deliver services to the customer;

3. Provider, which defines any and all tangible elements of an infrastructure the service organization utilizes to deliver service;

4. Performance, which is the actual result of the delivery;

5. Perception, which is the result or end-game of promotion and is the emotional response from customers toward the capability, quality and value of the service;

6. Place, which defines where the services are purchased, how they are sold and who will determine where the service will be provided; and

7. Price, which defines the value of the amount of money or fees the buyer must pay to the supplier for receipt of services.

Enlightened Service Marketers

Managers who adopt these principles really understand the subtle and unique differences between products and service and, in doing so, have become "enlightened" marketers. Enlightened service marketers have learned how to integrate the seven Ps into effective marketing programs. This requires that the service marketer fully define and articulate the service offering (e.g., promise or portfolio) to the customer; describe processes and procedures (e.g., process), which manage service delivery to give the customer the comfort level, knowledge and picture of the service(s) to be delivered before they actually are delivered. In essence, enlightened marketers describe to the potential customer what the experience will be before he or she receives it.

Enlightened service marketers also leverage their company's investment in infrastructure (e.g., provider) in the marketing mix. This builds an expectation of the level of service and activity the customer can expect from the amount of investment the supplier has made in its infrastructure. Tools and technology such as field communications, call centers and remote diagnostics give tangible evidence to a customer that the provider has an infrastructure it can utilize to leverage the quality of service (QoS) delivery.

Service marketers not only must consider concepts such as promise, process and provider in the marketing mix, they also must demonstrate performance. In essence, they must provide evidence that they deliver on the promises they make. Performance results must be shared continuously with current and potential customers. Service companies must reiterate continuously that they can consistently achieve the results that are promised. Examples of performance include customer satisfaction results, testimonials and guarantees, as well as description of lessons learned from past performance.

Perception is everything in service. Perception can make or break a company. It simply is not enough to promote the company through marketing collateral. Marketers must deal with influencing current customer views of future service performance. Service marketers most effectively manage and influence perception through any means necessary, including printed material, verbal and visual aids, advertising, communications and customer relations.

The concept of place is a complex issue for service marketers. The service marketer must deal with a number of different issues in bringing services to market, such as:

• Who sells the service: a direct sales force or a channel partner?
• Who actually delivers the service: a third party or a channel partner?
• How do customers obtain or acquire more service: through a call center or web page, or by calling a service engineer, for example?

Services often are delivered by an organization the customer does not deal with, as in the case of a service subcontractor or partner, or when the customer must turn to a dealer or distributor channel for provision of services.

Price issues also take on different elements in service marketing. Enlightened service marketers understand the value-added potential of both time and perception in determining price. Time is a variable that service marketers can manage and control to their advantage. Service marketers realize that they can charge premiums for rapid-response service, whereas the price of product is the same, regardless of whether the product could be produced in two hours or two days. Furthermore, perception can impact price by as much as 1,000 percent in a service business, compared to 100 percent in a product business.

Profitable Marketing Mix

The following example illustrates how an organization can utilize the seven Ps of service marketing to create a marketing mix that results in increased revenue and market share: The XYZ Company offers local area network (LAN) service and support, and essentially offers people the skills and expertise to support LANs. This is the extent of its service product. This service can be provided either on-site or remotely. XYZ prices by the hour and promotes its service through advertisements in a local business paper. This particular marketing program, based on the four Ps of product marketing, is producing less-than-encouraging results for the XYZ Company. Revenue and profits are not growing as rapidly as market projections. XYZ's experience does not reflect the fact that network service is a fast-growing market opportunity.

In contrast, the ABC Company is in the same business as XYZ. However, the ABC Company has become more successful than XYZ by incorporating the seven Ps of service marketing into its marketing mix. For example, the ABC Company's promise is a clearly defined and articulated portfolio of service offerings ranging from 24x7 coverage to remote monitoring to four-hour response time. The ABC Company also is effective in describing to the customer the process of how service will be delivered, including describing the skills and certification of employees and defining the processes and procedures the company utilizes to deliver service to the customer. ABC Company explains the call-handling and call-management processes and the training and experience of service personnel assigned to the customer site. In its marketing collateral and sales presentation material, the ABC Company clearly describes its capabilities as a network service provider.

Customers are impressed by the fact that ABC Company invested a large amount of money in building a state-of-the-art network management system with remote monitoring and diagnostics capabilities. The ABC Company utilizes customer testimonials and results of customer satisfaction surveys to demonstrate performance. The fact that ABC Company continually tracks customer satisfaction performance and offers a performance guarantee further builds customer confidence and loyalty.

Clearly, the ABC Company is managing its perception as a provider in radio and print media and through its relationship with customers. The message to the market is that ABC is a financially stable company with the unique ability to support mission-critical network technology. ABC sells its services directly to chief financial officers (CFOs) of mid-size companies through a direct sales force. Although on occasion ABC uses subcontractors to deliver service to its customers, customers have the perception that ABC is a one-stop shop for service. This, by the way, is the perception the ABC service marketing team manages to its fullest. Furthermore, since ABC is perceived as being the best at what it does, and since it can demonstrate results, the company can offer premium service at a premium price.

The XYZ Company and the ABC Company share the same basic characteristics: They are in the same business, serve the same customer base, offer the same service, have been in business for the same number of years and hire the same type of personnel. However, revenues and profits of the ABC Company are three times higher than XYZ's. Clearly, the ABC Company is doing a much better job in managing the marketing mix from the perspective of the service paradigm. The XYZ Company is struggling because its marketing mix is based on a product model.

While the example above represents fictitious companies, it is intended to be representative of everyday real-world situations. One only needs to compare the experience of leading companies' results with organizations that are struggling to see the real differences in their marketing approach. This clearly demonstrates that successful service companies are rethinking and re-inventing how they market service to their customers. The seven Ps of service marketing represent a new model for building a successful service marketing program.

Michael R. Blumberg, CMC, is vice president of strategic planning and market research for management consulting firm D.F. Blumberg & Associates Inc., Ft. Washington, Pa. He can be reached at +1 215 643 9060 or via e-mail at dfba@dfba.com