Unit 1: Introduction to services
Services Marketing notes · PTU syllabus (BBA 611-18)
On this page
Unit summary
Services now produce more than half of India's GDP — banking, telecom, IT, tourism, healthcare and education. This unit explains why the service sector has grown, how services differ from goods, how they are classified, the extended 7Ps marketing mix, and how service quality is measured with SERVQUAL and the gaps model.
After this unit you can
- Explain the reasons for the growth of the service sector and its role in India
- Describe the characteristics and classification of services
- Explain the extended service marketing mix (7Ps)
- Apply SERVQUAL and the integrated gaps model of service quality
PTU syllabus topics
- Reasons for growth of the service sector
- its contribution to the Indian economy
- service characteristics and classification
- the extended service marketing mix
- SERVQUAL and the integrated gaps model of service quality
Intangibility
Cannot be seen or touched before purchase
Heterogeneity
Quality varies each time
Inseparability
Produced and consumed together
Perishability
Cannot be stored
Topic 1
Growth of the service sector
A service is any act or performance that one party offers to another that is essentially intangible and does not result in ownership of anything (Philip Kotler).
Reasons for growth
- Rising incomes: households spend more on leisure, travel, dining, health and education.
- Technology and the internet: UPI payments, e-commerce, OTT, app-based cabs and food delivery.
- Outsourcing: firms buy logistics, IT, security and housekeeping instead of doing them in-house; India's IT-BPM exports.
- Liberalisation and privatisation: banking, insurance, telecom and aviation opened to private players after 1991.
- Demographic change: nuclear families, working women and an ageing population create demand for childcare, healthcare and convenience services.
- Government focus: Digital India, Skill India and tourism promotion.
Contribution to the Indian economy
- Services contribute over 50% of India's Gross Value Added and are the largest sector.
- Largest recipient of FDI inflows (financial services, IT, telecom, trading).
- Major share of exports through IT and software services.
- Large employer in urban areas — retail, transport, hospitality, healthcare, education.
Exam tip
In a long answer on growth, organise reasons as economic, social, technological and political — it shows structure and earns more marks.
Topic 2
Characteristics and classification of services
Intangibility
Cannot be seen, touched or tasted before purchase
Heterogeneity
Quality varies with who, when and where
Inseparability
Produced and consumed at the same time
Perishability
Cannot be stored — an empty seat is lost forever
| Characteristic | Marketing problem | Strategy |
|---|---|---|
| Intangibility | Customer cannot judge before buying | Tangible cues, brand, testimonials, physical evidence |
| Heterogeneity | Inconsistent quality | Standardisation, training, SOPs, automation |
| Inseparability | Provider is part of the service | Train staff, manage customers, multi-site delivery |
| Perishability | Unused capacity is wasted | Demand management: differential pricing, reservations, off-peak offers |
A fifth characteristic often added is lack of ownership — the customer gets access or experience, not ownership.
Classification of services
- By recipient and nature (Lovelock): people processing (haircut, surgery), possession processing (car repair, laundry), mental-stimulus processing (education, consulting), information processing (banking, accounting).
- By market: consumer services vs business-to-business services.
- By degree of contact: high contact (hotel, hospital) vs low contact (online banking).
- By labour intensity: people-based (teaching) vs equipment-based (ATM, vending).
- By goods content: pure service (consulting) → service with accompanying goods (restaurant) → goods with accompanying service (car with warranty).
Example
A restaurant meal is a mix — food is a good, but the ambience, waiting and serving are services; this is why the goods–services continuum is used.
Topic 3
The extended service marketing mix (7Ps)
- 1
Product
Core + supplementary service
- 2
Price
Value-based, demand-based
- 3
Place
Physical and electronic channels
- 4
Promotion
Communication that tangibilises
- 5
People
Staff and customers
- 6
Physical evidence
Servicescape, uniforms, brochures
- 7
Process
Flow of activities and delivery system
- People: front-line employees are the service in the customer's eyes; other customers also shape the experience (a noisy table in a restaurant).
- Physical evidence: the environment and tangibles that signal quality — a hospital's cleanliness, a bank's interiors, a website's design.
- Process: the actual procedures and flow — standardised (McDonald's) or customised (wealth management); online check-in in airlines.
Exam tip
Booms and Bitner (1981) added People, Physical evidence and Process to McCarthy's 4Ps — mention the names in an answer.
Topic 4
Service quality: SERVQUAL and the gaps model
SERVQUAL (Parasuraman, Zeithaml and Berry, 1988) measures service quality as the gap between customer expectations and perceptions across five dimensions.
- Reliability
- Performing the promised service dependably and accurately
- Assurance
- Knowledge, courtesy and ability to inspire trust
- Tangibles
- Physical facilities, equipment, appearance of staff
- Empathy
- Caring, individual attention
- Responsiveness
- Willingness to help and prompt service
Service quality score = Perception − Expectation. A negative score means the service falls short.
The integrated gaps model
- 1Gap 1 Listening gap
Not knowing what customers expect
- 2Gap 2 Design gap
Wrong service designs and standards
- 3Gap 3 Performance gap
Not delivering to standards
- 4Gap 4 Communication gap
Promises not matching delivery
- 5Gap 5 Customer gap
Expected vs perceived service
- Gap 1 (knowledge): poor market research, little upward communication, no relationship focus.
- Gap 2 (standards): no customer-defined standards, poor service design, inadequate physical evidence.
- Gap 3 (delivery): weak HR policies, role conflict, customers not playing their role, intermediary problems.
- Gap 4 (communication): over-promising in advertising, poor internal communication.
- Gap 5 (customer gap) is the result of gaps 1–4; closing the provider gaps closes the customer gap.
Example
An airline that advertises "on-time every time" but runs late creates Gap 4; if staff are not trained to handle delays, that is Gap 3.
Key terms
- Service
- An intangible act or performance that does not result in ownership
- Perishability
- Services cannot be stored for later sale or use
- Physical evidence
- The tangible environment and cues that signal service quality
- SERVQUAL
- A scale measuring service quality as perception minus expectation on five dimensions
- Customer gap
- The difference between expected and perceived service
Quick revision
- Growth drivers: income, technology, outsourcing, liberalisation, demographics.
- IHIP: intangibility, heterogeneity, inseparability, perishability.
- 7Ps = 4Ps + people, physical evidence, process.
- SERVQUAL = RATER; quality = P − E.
- Gaps 1–4 are provider gaps; Gap 5 is the customer gap.
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.Define services.
- Q2.State four reasons for the growth of the service sector in India.
- Q3.What is meant by perishability of services?
- Q4.What is the extended marketing mix?
- Q5.Name the five dimensions of SERVQUAL.
- Q6.What is the customer gap?
Long-answer questions
- Q1.Explain the reasons for the growth of the service sector and its contribution to the Indian economy.
- Q2.Discuss the characteristics of services and their marketing implications.
- Q3.Explain the extended service marketing mix with examples.
- Q4.Explain the integrated gaps model of service quality and how each gap can be closed.
Stuck on this unit?
Message SBS on WhatsApp for help with Services Marketing, or to ask about studying BBA at Synetic.