Western markets have seen a continuous decline in their manufacturing industrial bases in recent decades, their place being taken by a compensating growth in employment in services industries. The growth in demand for services is powered in part by growing affluence and changing lifestyles/work-styles. This trend is now extending into many developing markets (including Sri Lanka) as incomes rise, a growing middle class emerges, and consumers move beyond just satisfying needs for physical products. Also there is a trend for the developing markets to out source parts of their support service needs (e.g. for software development, telephone call centres, financial services back office activities) to some developing markets, notably in Asia, where labour is cheaper and appropriate skills are available from within large pools of suitably educated and trained populations.

Some of the growing service industries include travel, entertainment, leisure, health and fitness, personal grooming, communications services, restaurants, banking, finance and insurance, recruitment and consultancy, and even the professions of legal and accounting services. Sri Lanka is no different in experiencing this trend, even though it might not be at the pace of the developed nations. Even within the developing markets, such as Sri Lanka, specialist firms are emerging to provide specialist services to other local companies, and some of the opportunities include distribution logistics, staff recruitment and training, computer services, advertising and market research. Specialist service companies are often more efficient and expert than an in-house department fulfilling the same function, and can provide the service at a lower cost as they spread their service across a range of clients.

Whilst the focus of a successful services business must be on addressing customer needs and providing customer satisfaction (to a greater degree than competitors), at an acceptable price, few developing services businesses are serious marketing concerns. Most are expert in the services they provide, but not experts in selling and marketing those services. Many fail to understand and develop competitive advantage to capitalise on the opportunities in the market place. In particular they often do not develop a meaningful marketing strategy plan, and rely more on technical specialists for the sales and marketing activity rather than recruit sales and marketing professionals. Hence in many markets those service providers with good marketing strategies, effectively implemented, over time often steal the lead from competitors, and frequently seize opportunities to buy into or buy out competitors.

In a subsequent article I will address the sales force issues in the services sector, discussing qualities and skills, recruitment practices and training, and some motivational aspects. In this article I want to focus on some strategic factors affecting typical services providers.

Marketing is a misunderstand concept within many service providers. Marketing provides a longer term direction to the business, that can give the company a customer orientated focus. Strategy will define the markets the company is operating in and the kind of company it is. Strategy is the company’s stated objectives and goals, and its policies and plans for achieving those goals.

Strategic marketing planning focuses on:

* identifying target segments

* developing marketing mix factors in relation to target segments.

Marketing is often mistaken for advertising, which is actually a communication tool conveying messages as part of the positioning process of the service provider. It is not a short-term tactical tool like sales promotional activity. Marketing is not the same as sales activity, primarily aimed at achieving immediate orders from identified customers. And marketing is not the same as customer service. Improving customer service might be part of the implementation of the marketing strategy, but will only be meaningful if it actually addresses customers’ real needs. Having a welcoming attendant opening the door of a bank or airline office is no benefit in the marketing context if busy customers are then frustrated by long counter queues.

Traditional physical product marketing focuses on the 4 P’s – product, price, place and promotion. For services marketing it has been recognised for some time that there are additional marketing mix factors, as there are intangible product factors not reflected adequately in the traditional 4 P’s. Some marketers like to expand the mix for services to include a factor for "customer services", but I prefer to keep things simple, and consider just 2 additional P’s –people and processes. Customer services are a combination of people/process factors.

Diagram 1 illustrates the 6 P’s, and just some of the variable factors of the marketing mix within each of the P’s. In services marketing of intangibles, or where companies are marketing a mix of products and services (e.g. selling computer hardware and software, and accompanying that with training and maintenance support and service) then the people and processes of the business are core factors influencing company performance in a competitive environment. For example, a company leasing office equipment may have a competitive pricing structure, but if they cannot provide a prompt same-day maintenance service they will lose business to competitors who can.

A company providing a physical (tangible) product can often expand its product offer by including services such as:

* consultancy

* training

* product customisation

* quick response maintenance

* special delivery/installation arrangements

* inventory management for clients (e.g. holding stock pending orders)

* no-argument warranties (e.g. money back guarantees if not satisfied..

The intelligent marketing organisation will segment its customers into categories, and provide a different marketing mix package to meet the needs of each category. This is only possible where suppliers actually research the needs of customers and can group customers into definable categories where:

* segments are large enough to be served cost-effectively

* customers within the target segments are actually identifiable and can be reached

* segment customers exhibit a good degree of similarity in needs , and the mix of needs is sufficiently different between the customer segments

* criteria for defining the segments are relevant to the buying decision process

* achievements in the segments are measurable.