The Age of Digital Services Marketing

Cite as: Mereu, S. (2024). The Age of Digital Services Marketing. In P. B. Pires, J. D. Santos & I. V. Pereira (Eds.), Digital Marketing: Analyzing its Transversal Impact (pp. 175-194), CRC Press.

Abstract

The rise of the services economy has prompted companies to apply a more specialized marketing approach. This established what came to be known as services marketing. With intangible products, e.g., services, offering an arguably more complex set of characteristics than tangible products, e.g., goods, services marketing strategies and tactics are often considered to be more elaborated and multifaceted than strategies and tactics for goods. Additionally, the continuous evolution of information and communication technology (ICT) and its applications for contemporary product offerings heighten the need for marketers to carefully consider how services marketing can be driven by digital technology. Particularly the current technological transition to a more immersive online experience provides new opportunities for companies and brands, underlining the necessity for an unmistakable application of a digital-first approach to services marketing. This chapter introduces services as an economic and experiential offering in the digital age and discusses the components of the services marketing mix to establish what digital services marketing is and how it can be applied. The subsequent discourse provides a theoretical foundation for marketing practitioners, academics, and students upon which modern-day services marketing strategies and tactics, case studies, and research projects can be conceptualized.

1. Services as an Economic and Experiential Offering in the Digital Age

As economies increase their per capita income, the main economic offering generally shifts from a goods economy to a services economy (Kim, 2006; Pine & Gilmore, 2020). The shift brings considerable structural change, as goods and services are fundamentally different offerings. Historically, goods are objects of value that can be owned by way of purchase (Wirtz & Lovelock, 2022). Services, on the other hand, “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” (Lovelock et al., 2017, p. 1/4). In today’s globalized and connected world, services provide a direct or indirect intrinsic experience around their offerings, which can strengthen brand loyalty, due to the omnipresence of ICT, the influence of lifestyle brands, and the integration of entertainment with marketing (Brakus et al., 2009; Schmitt, 1999). However, a digital transformation entails more than just adding digital marketing and communications channels to an offering; a company is expected to embrace and integrate a digital mindset into its culture and organization (Ryan, 2021). As proposed by Kotler et al. (2021), the goal of marketing should be “to demonstrate to the customers that the correct applications of technology may improve human happiness” (p. 66). This can be applied to services as main products, as well as to services as product extensions.

In the early 2010s, Kotler and Keller (2012) defined marketing as a business activity that helps “introduce and gain acceptance of new products that ease or enrich people’s lives” (p. 4). Yet, their definition did not emphasize the importance of technology in marketing, an element that became crucial for numerous business activities by 2020 with the spreading of the coronavirus pandemic. Governments worldwide restricted human contact to contain the spreading of the virus by ordering the lock-down of a variety of businesses and other organizations for longer periods of time and, consequently, limiting most commercial, institutional, and social activities to online channels (Financial Times, 2022). This led to a surge in the utilization and consumption of online services (IMF, 2022). It further led to the realization that technology is a crucial element in modern-day life, and, because of that, also in contemporary marketing (Rust, 2020). With the technology aspect in mind, Kotler et al. (2021) introduced a new level to marketing defining it as “the application of human-mimicking technologies to create, communicate, deliver, and enhance value across the customer journey” (p. 6). This implies applying a variety of technologies to enable effective marketing efforts in a digitally enhanced world.

Based upon the above-mentioned definitions and arguments, services marketing in the digital age can be defined as the creation, communication, delivery, and enhancement of intangible and value-adding services offered through a variety of communicative avenues that connect the physical and virtual world along the customer journey via contemporary technologies. Henceforth, this defines the term digital services marketing. To achieve the above-mentioned goal of digital services marketing, strategies and tactics need to be developed along a set of marketing components, also known as the marketing mix (Kotler et al., 2021). McCarthy (1960) defined the original 4 Ps of marketing by including the four components price, product, promotion, and place. The mix was later updated and expanded in various marketing literature, which, however, vary to different degrees in their perspective and terminology. A prominent update resulted in the inception of the 7 Ps of the services marketing mix, which first added the components people, physical evidence, and process management, and was later expanded to the 8 Ps with the addition of productivity and quality (Lovelock et al., 2017). The following sections define the eight components and discuss applications in the context of digital services marketing.

2. The Digital Services Marketing Mix

2.1. Product

Mullins et al. (2018) define the product as “anything that satisfies a want or need through use, consumption, or acquisition” (p. 341) and add that products can be objects (e.g., cars, phones, clothes), services (e.g., education, consultation, dry-cleaning), places (e.g., London, Disneyland), people (e.g., politicians, celebrities), and ideas (e.g., #metoo, #blacklivesmatter). Throughout the wider creation process of a product, an essential task for marketing managers is to “select the features of both the core product (either a good or service) and the bundle of supplementary service elements surrounding it, with reference to the benefits desired by customers and how well competing products perform” (Lovelock et al., 2017, p. 1/20). Kotler and Keller (2012) add that a great product is at the heart of a great brand and “to achieve market leadership, firms must offer products and services of superior quality that provide unsurpassed customer value” (p. 325). These definitions reflect the perspective of traditional companies that create value for their end consumers through their products without including them in their ecosystem, whereas products that are based upon a digital media platform are generally built to co-create the user experience with their customers (Hein et al., 2020). This applies, for example, to social media platforms that use third-party content as their main media product (Kietzmann et al., 2011). It also applies to smartphones that merely offer the hardware onto which users install their preferred apps and, hence, create a digital media services device customized to their needs and wants; and, it applies to online streaming platforms that are fed viewing behavior data from their users to inform the suggestion algorithm (Balbi & Magaudda, 2018).

To create and promote a product that consumers want to purchase and use, Kotler and Keller (2012) suggest five product levels organized hierarchically according to benefits and customer value. The first level refers to the core benefit(s). These are fundamental benefits customers buy into, such as easy and instant access to entertainment in the case of a streaming service like Netflix (cf. Rubin, 1983), virtual reality (VR) from the comfort of one’s home as in the case of the Oculus Quest VR headset (cf. Lee et al., 2021), or a personalized digital media hub in the palm of one’s hand through a smartphone (cf. Balbi & Magaudda, 2018). The next level is the basic product. Based upon defined core benefits, a company designs its product. As an example, for a streaming platform to offer uses and gratifications to its viewers through video entertainment, appropriate entertainment media products need to be provided through the platform. Or, if a virtual tour through an art museum is to be offered, that virtual experience needs to be conceptualized, designed, programmed, and launched by skilled specialists. With this in mind, managers tackle the next level, the expected product. Customers expect certain conditions and attributes from a product. Hence, a company should deliver the product it promotes, which is also the product consumers expect to receive. This is what constitutes the customer-centric marketing approach that was prevalent in the second half of the twentieth century (Kotler et al., 2021). Especially, in a world where products can be compared instantaneously, and abundant alternatives are found with a simple online search, providing the expected product is not simply nice to have, but constitutes a necessity to ensure customer loyalty.

This leads to the next product level, the augmented product. Customer expectations can be exceeded by augmenting products through the delivery of functional and affective value that goes beyond core and expected products (Kim et al., 2019). This is a crucial notion to stand a chance with the fierce competition in the digital environment. Simple augmentation could consist of creating a website or mobile app with features and visual elements that are more aesthetically pleasing and appealing than a competitor’s digital offering (cf. Ryan, 2021). To elicit emotions, the product provider should satisfy consumers’ needs and wants by offering an experience they want to absorb (Pine & Gilmore, 2020). This could entail adding free services that enhance the experience, such as a possible VR offering to an online shop, behind-the-scenes content to a new show, or a limited edition non-fungible token[1] (NFT) with functional utility. After having considered viable product augmentations and transformations, a company needs to reflect upon how to satisfy consumers’ needs and wants in new ways to differentiate itself from competitors, which introduces the last level, the potential product. As consumers become accustomed to augmented products and features, these augmentations become expected, and they fall into the hierarchy. Hence, companies need to think about future products or product features to augment their offerings. With continuous innovation in immersive online technologies, companies can choose from a growing array of digital tools to enhance their offerings, especially with mixed reality, the metaverse, or digital tokens (Kotler et al., 2021; Lee et al., 2021).

2.2. Price

Price refers to the amount of money customers are requested to pay to receive anticipated benefits (Kotler & Keller, 2012). It is used as an indicator of product quality and benefits, where higher-priced products can be perceived to provide higher quality, as compared to lower-priced offers, and may be less susceptible to offers of rival brands (Yoo et al., 2000). Expectations regarding the perceived quality of a product are to be managed by defining the most appropriate price while reflecting the product’s quality and the way it is marketed and distributed to consumers (Wirtz & Lovelock, 2022). Lovelock et al. (2017) note that other costs of service, such as time, mental and physical efforts, as well as unpleasant sensory experiences, can be perceived as indirect costs which may lower the perceived quality of the consumer experience. In the digital age, a brand or product with a wide reach across various digital channels can price its services higher, such as promoting a product to its fans or subscribers; this is especially visible with lifestyle brands and services provided by influencers (The Economist, 2022).

Prices can be set based on three perspectives: The customer-based perspective reflects on “what the market will bear”; the competitor-based perspective considers “what competitors charge”; and the cost-based perspective asks “what profit margin should a company aim for” (Cram, 2008). The potential price range starts at the floor price, which is defined by the costs incurred by the company to produce the product; the range then ends at the ceiling price, which is defined by the customer’s ability to buy the product. The perception of how appropriate the price for the offered product or service is based on the impact that brand marketing has on consumers; this includes how well the brand can depict and communicate the value consumers would receive from the purchase of the product and to which degree the brand and its products are considered to be superior to its competitors (Lovelock et al., 2017).

Although some consumers may be highly devoted and price-insensitive when it comes to lifestyle brands they love (Rahman et al., 2021), there will be a threshold they will not be willing to cross regarding spending money on a specific product. If an offering becomes too expensive to bear, certain consumer segments will not be willing or able to afford it (Cram, 2008). Rethinking the desired (or necessary) profit margins that need to be made on top of a product’s floor pricing, helps to define a more appropriate price. Comparing the prices of competitors with one’s own price can provide a better understanding of what the market can bear (Lovelock et al., 2017). This is especially important in a world with ubiquitous information access, as consumers can compare prices with a simple online search and choose the cheapest or most convenient supplier (Ryan, 2021). If a company envisions higher profit margins and therefore higher prices, then the additional value that can be expected from consuming the product should be communicated (Yoo et al., 2000). For example, if a cloud-storage service is priced higher than its competitors, detailed information on the characteristics that legitimize the higher price can be delivered across various communication channels (see Batra & Keller, 2016). This could include explaining, for example, that the service uses more secure technology, or that its servers are located in a country that upholds the highest possible consumer privacy ethics.

In the context of the digital economy, consideration needs to be given to the fact that prices for digital products have generally decreased, because of better business efficiency employed through digital inputs and lower prices for main production and operations activities; examples can be found in digital products categories such as website design, telecommunications services, or consumer electronics (Balbi & Magaudda, 2018). However, with the transition to a blockchain-based Internet and a wider acceptance of digital tokens, especially NFTs, the above-mentioned pricing dynamics need to be reassessed. For instance, NFTs are utilized to protect sensitive information and preserve their utility through a unique identification token, which provides greater consumer value to their owners via a specific functionality, e.g., access to an online or offline service, intrinsic value of digital item because of its scarcity, or digital wearables for a user’s avatar, to name a few (Kaczynski & Kominers, 2021). As NFTs can be limited to a specified amount, their price can easily surge because of their comparative value; the ease of buying, selling, or trading NFTs also fuels the potential price increase (Wang et al., 2021). It is noteworthy that the average revenue per user in the NFT segment has considerably grown from USD 5.14 in 2018 to USD 56.89 in 2022 (Statista, 2022a). Although the crypto crash of 2022 may have dimmed the generally positive outlook on the wider crypto market (Botros, 2022), these numbers show that NFT buyers still recognize the potential economic gain and are willing to bear a higher price. Yet, because the pricing of cryptocurrencies significantly influences the pricing of NFTs (Ante, 2022), owners may be reluctant to sell, as the tokens would be sold at a loss. On the other hand, buyers are more eager to purchase NFTs during a cryptocurrency downturn, because of lower prices. These dynamics affect the pricing of such digital items in unprecedented ways, forcing companies to rethink their pricing approach. Nevertheless, the three perspectives remain a viable tool to assess pricing in the Web 3.0[2]. 

2.3. Promotion

Marketing campaigns rely on effective promotion and communications to reach their goals (Batra & Keller, 2016). The idea of messages delivered through what was traditionally called the promotional mix is to accompany consumers through their customer journey and achieve specific objectives along that journey (Mullins et al., 2018). This implies an audience-centered approach that is built upon brands creating and maintaining good relationships with their customers (Fill & Osmond, 2017). The digital age has brought considerable changes to the channels and opportunities offered by or through the promotional mix, which in marketing has evolved to what now is commonly known as the integrated marketing communications (IMC) mix (Yeshin, 2008). This section focuses on the eight communication objectives that companies should seek to achieve, as put forth by Batra and Keller (2016) while utilizing various promotional channels.

Create awareness and salience: Companies should ensure their target audiences are aware of the offered products; this can be achieved by being appropriately prominent through advertising, direct marketing, personal selling, website and search, and, possibly, as a sponsor at events (Batra & Keller, 2016). For example, a hotel in New York City could promote a hospitality package that can be booked on their website by advertising it on third-party websites and social media platforms with display ads or sponsored posts. Furthermore, it can send personalized marketing emails to the targeted audience, or communicate the offer through press releases and industry magazines. Personal selling in a traditional setting may not directly apply to this example, although it may have a great influence in another setting. However, personal selling in an online context could refer to a hotel manager or director offering a free webinar to their contacts on social media to, for example, introduce refurbished rooms, a new in-house restaurant, or maybe a new concierge, and directly answer questions in the webinar.

Convey detailed information: Holistic brand experiences include an educational component through which consumers can learn about a company to make informed decisions, such as whether or not to buy a company’s products (Pine & Gilmore, 2020). The same applies to an online environment, where information is shared via, for example, a company’s website or email newsletter. McCarville and Stinson (2014) note that consumers feel more comfortable about a brand when they find or receive value-adding information, which means brands should simplify the flow of information about their products. It is therefore essential to create a well-organized and easy-to-navigate virtual experience that offers visually appealing and value-adding content underlining the purpose of the website or email newsletter (Garett et al., 2016; Ryan, 2021). For example, an established clothing brand would share as many details as possible about a new collection in their online shop, including size, price, stock, product description, delivery, returns, payment options, etc. The same can be done through other adequate channels, like social media or email newsletters while adapting the conveyance of the message regarding the channel, where necessary.

Create imagery and personality: Batra and Keller (2016) suggest that the communication channels with the most influence on consumers about brand imagery and personality are TV advertising and social media. Advertising and other paid media reach a wide audience that might not know about the brand or its products (Ryan, 2021). Similarly, social media can have a wider reach than traditional media (see Statista, 2022b). A possible approach is to emphasize aesthetics and entertainment (Pine & Gilmore, 2020). For example, Nike’s popular 2014 #DareToZlatan campaign was based on strong aesthetics portraying Swedish football (soccer) player Zlatan Ibrahimović as a super-athlete; the campaign offered great entertainment value while showing off Ibrahimović’s skills in cartoon-like worlds (see Bianchi, 2014). A more contemporary approach would see a brand taking advantage of Instagram’s or TikTok’s entertainment value with content that is visually and emotionally entertaining (Barta et al., 2023).

Build trust: Brand trust is best built through public relations (PR), social media, and personal selling (Batra & Keller, 2016). PR aims to place the brand in numerous third-party media outlets, such as TV channels, magazines, websites, news portals, social media, and so on. Such mentions are perceived as unbiased and neutral, which is different from the perception that people have when they encounter an ad or a company’s press release (Fill & Osmond, 2017). For example, in 2021, Sotheby’s, the world’s oldest auction house, launched a digital gallery on Decentraland, an interactive virtual world. Following standard business procedures, the innovative project was accompanied by an official communication from Sotheby’s (see Sotheby, 2021) and Decentraland (see Decentraland, 2021) to inform third-party media and encourage objective and unbiased coverage of this possibly controversial project. Media outlets from different industries and regions of the world covered the topic. Social media can also have a great influence on building brand trust, especially when the brand involves the community and cherishes the brand-customer relationship (Laroche et al., 2013). This means a company such as Sotheby’s should ensure its target audience perceives the brand as available and active online. This entails showing that Sotheby’s is an active member of the art, jewelry, and collectibles community and appreciates the social interactions and contributions around respective topics (see Kietzmann et al., 2011).

Elicit emotions: Schmitt (1999) highlights that to stimulate sentiments, marketing activities should appeal “to customers’ inner feelings and emotions, with the objective of creating affective experiences that range from mildly positive moods linked to a brand […] to strong emotions of joy and pride” (p. 61). Advertising, PR, events, and social media can have a great influence on the recipients of a marketing message (Batra & Keller, 2016). Moreover, Belch and Belch (2003) note that “emotions generated by [an advertisement] are important because they may become associated with the advertised product through classical conditioning” (p. 125). A good example is Nike’s commitment to the Black Lives Matter cause, a social and political movement, which is of great importance to their target audience and community (Nike, 2020). Nike created an emotional marketing campaign on the subject with different ads (see YouTube/Nike, 2020), ensured the media would report about it (e.g., Mirzaei, 2020), encouraged NBA athletes to wear Nike shirts with a “Black Lives Matter” print (Mauch, 2020), and made sure all of it would be shared across social media with a dedicated hashtag like #blacklivesmatter to evoke emotions.

Inspire action: After consumers have gone through the journey of becoming aware of a brand, learning about its products, understanding the brand’s image and personality, trusting it to be a legitimate brand to buy into, and forging positive emotions towards it, the next step is to inspire specific actions (Batra & Keller, 2016). An effective way to inspire action online is direct marketing, or more specifically, email marketing (Hudak et al., 2017). To achieve the expected conversion, call-to-action elements should be defined and applied; this is best undertaken by introducing a product via a direct or subliminal sales message, which is followed by a visually unmistakable call-to-action button appropriately placed within the email (Ryan, 2021). Action can also be inspired through sales promotions across various channels. However, depending on the target audience, this may not always be a suitable approach. For example, price promotions for luxury hotels on discount websites may negatively affect the status of the hotel brand among consumers with a high need for status (Yang et al., 2016).

Instill loyalty: Once a consumer converts to a paying customer, a marketer’s task of satisfying that customer’s needs and wants becomes even more important, as the next goal is to elevate the customer’s status to loyal (Kotler & Keller, 2012). Hence, it is essential to recognize that the four dimensions of a brand experience impact brand loyalty; thus, brands must provide a complete experience based on aesthetics, emotions, information, and engagement (Brakus et al., 2009). These experiences are individually offered at various stages of the customer journey. Nevertheless, a brand should appropriately synthesize the experiences to offer a consistent brand experience. A possible approach is for a brand to create a variety of content with different media formats for different online communication channels based on the four brand experience dimensions. This means the company could deliver relevant information on its products and brand, evoke emotions through affective stories, set the mood with beautiful and intriguing visuals, and engage fans in discussions and activities around the current campaign. Publishing these contents under a strategically designed calendar would foster the meaning of the brand- or product-story and, hopefully, turn customers into fans.

Connect people: Batra and Keller (2016) note that “high consumption satisfaction should lead to brand repurchase behavior and loyalty, but this may not, by itself, create brand advocacy” (p. 132). Hence, brands need to support and encourage people to engage and connect with each other, especially since smartphones enable consumers to engage with their favorite brands and peers anytime, anywhere (Balbi & Magaudda, 2018). Social media on mobile devices can be considered effective to achieve a said goal (Batra & Keller, 2016). Vale and Fernandes (2018) found that social media users mainly consume, contribute, or create content because they seek information, empowerment, and brand love. This means that to drive engagement, fans on social media want relevant information, want to be able to influence others, and want to be emotionally attached to the brand.

2.4. Place

The last of the four Ps in the traditional marketing mix is place, often also referred to as distribution; this component considers how consumers are concerned with the convenience of purchasing a product in a given distribution network (Mullins et al., 2018). Lovelock et al. (2017) note that products may be delivered through physical or electronic distribution channels or a combination of both––whatever adds value to the customer; furthermore, products could be delivered “directly to customers or through intermediary organizations, such as retail outlets owned by other companies, which receive a fee or percentage of the selling price to perform certain tasks associated with sales, service and customer-contact” (p. 1/20). In a digital context, this also applies to platforms like eBay or Udemy, which offer an online marketplace to anyone who wants to sell a tangible or intangible product online. With ever-growing opportunities for brands and individuals with an idea to create a product and sell it online, distribution intensity becomes crucial for creating awareness about the offering. Yoo et al. (2000) ask the following three questions to assess how consumers perceive the distribution intensity of a product: (1) More stores sell Product X, as compared to its competing brands. (2) The number of stores that deal with Product X is more than that of its competing brands. (3) Product X is distributed through as many stores as possible. Consequently, a brand with global aspirations, like, for example, a shoes and clothing brand, would want to (1) have their products sold in more stores than their competitors online and offline, (2) be more visible across online and offline stores than their competitors, and (3) be as visible as possible across a large variety of stores online and offline to stay top-of-mind with consumers. A specific and wide distribution network––online and offline––is highly relevant when building brand equity, because it simplifies the purchase process offering consumers more access to the product, be it online or offline (Abril & Rodriguez-Cánovas, 2016).

Regarding where to place a brand and its products, as well as the respective promotion, marketers should first assess the potential reach their products can attain through a specific online platform (Ryan, 2021). However, not only general reach is essential, but also relevant reach, which refers to the number of users a brand can reach through a digital channel. These users should belong to the relevant target audience as defined by demography, geography, geodemography, psychography, and behavior (Pickton & Broderick, 2005). For example, with the above-mentioned reach and target audience characteristics in mind, brands choose the appropriate media platforms for their online videos, which may include product videos, storytelling videos, or behind-the-scenes features. When thinking about placing one’s corporate or product videos on a specific platform, YouTube may come to mind first, as it is recognized as the video platform with the largest active audience worldwide (Statista, 2022b). However, this is where relevant reach is to be considered in connection with the expected goal of the videos along the customer journey. Although YouTube could be used as a repository for a brand’s videos to raise awareness about the brand and its products, if found by YouTube users, a dedicated communication channel like a brand’s own app for mobile devices might be more appropriate, if, for example, the goal is to increase loyalty toward the brand (Plotkina & Rabeson, 2022). This could be achieved by offering videos exclusively through the branded app to enhance the brand experience with affective and entertaining videos, which can strengthen consumers’ identification with the brand, increase satisfaction with their products, and therefore bolster brand loyalty (Brakus et al., 2009; Pine & Gilmore, 2020). The same thoughts should be entertained when choosing the appropriate place for distributing a digital product or digital communication about a product for each specific IMC goal, as described in the Promotion section.

2.5. People

The people component of the marketing mix considers two perspectives: The first perspective refers to internal marketing and the importance of employees to the marketing success of an organization; the second perspective suggests that brands should view consumers as people with a specific lifestyle and understand their wants and needs, not just see them as consumers with whom they undertake a simple monetary transaction (Kotler & Keller, 2012). Lovelock et al. (2017, p. 1/21) argue that “customers will often judge the quality of the service they receive largely on their assessment of the people providing the service”; this leads to the notion that recruiting, training, and motivating personnel is crucial for the sustainable success of a company and the products it offers. Furthermore, people provide and receive brand experiences and, therefore, all stakeholders should be considered in the conceptualization of promotional campaigns (Pine & Gilmore, 2020). This includes employees producing, supporting, and delivering products, as well as people supporting any kind of operation online; it could also involve a brand’s social media followers, who co-create the experience with their engagement and contributions (Sutera, 2013). From a business-to-business (B2B) perspective, it can be argued that business partners, clients, goods and facilities producers, as well as supporting services providers are stakeholders that need to be considered within the people component (Mullins et al., 2018). Although B2B refers to two companies doing business together, it is critical to understand that the business partnership or transaction is effectuated between people, which emphasizes the importance of this component regarding B2B marketing activities.

Emotions can be evoked through face-to-face interaction (Schmitt, 1999). For example, a brand could employ a person with strong ties to the brand and its brand community when creating videos for its communication activities; this person should radiate a certain personality that appeals to the target audience with credibility and familiarity (Ryan, 2021). An example in the technology industry could be that a company like Salesforce, a cloud-based software provider, would employ a popular industry figure to introduce or review a new product in a podcast, live video, or other digital content. Schmitt (1999) mentions that “interactions do not occur in a social vacuum” (p. 167), which implies a direct co-creation of the brand experience between consumers and brands. Traditionally, for events that take place in a venue, this means that the atmosphere is created between the company that provides the experience and the people in the audience (Pine & Gilmore, 2020). In the digital age, the experience can be enhanced by encouraging consumers to co-create the experience. Event organizers can urge attendees and non-attendees of the event to engage with each other and contribute user-generated content across social media (Sutera, 2013). This may include attendees in the venue sharing visual impressions directly from the event with others. Additionally, people following the event online, who may simply not be able to attend, should be allowed to participate remotely in the event via, for example, live video or online Q&As. Such engagements can reinforce the attachment to the company and increase brand loyalty (Brakus et al., 2009). This is crucial in a post-Covid-19 pandemic world, where live events may suddenly be limited to fewer attendees or even forced to be held without an audience, due to unforeseen and uncontrollable events.

Digital communication channels offer convenient access and great influence in connecting people virtually (Sutera, 2013). Such social influence among a brand’s fans can be reinforced by establishing an environment specifically for like-minded consumers (Schmitt, 1999). The affiliation of customers with a brand they love can be based upon shared attitudes, beliefs, and behaviors, which fuel the self-categorization of individuals and lead them to associate with like-minded people and disassociate with unlike-minded others (Yocco, 2016). The example of Nike’s “Black Lives Matter” campaign shows how the brand positions itself and influences its fans to do the same (Nike, 2020).

2.6. Physical Evidence

Lovelock et al. (2017, p. 1/22) explain that “the appearance of buildings, landscaping, vehicles, interior furnishing, equipment, staff members, signs, printed materials and other visible cues all provide tangible evidence” of a company’s existence and service quality. This affects the impression consumers have of a brand, emphasizing the importance of environmental factors (Wirtz & Lovelock, 2022). When assessing the perception of how a brand’s physical evidence would affect its brand equity, Al-Dmour et al. (2013) suggest raising the following points: (1) Does the staff appear in attractive uniforms? (2) Are public facilities of the company comfortable and attractive? (3) Does the product provider use modern and sophisticated equipment? (4) Is the overall atmosphere comfortable?

In a digital context, however, physical evidence may refer to the appearance of digital channels, such as website design, social media presence, digital content aesthetics, and branded mobile app functionality. For example, (1) introducing a dress code or uniforms for staff and helpers in a physical environment could enrich the general aesthetic experience offline, but also online, as recipients of a message through digital media may feel a stronger sense of inclusion (Slepian et al., 2016). This could be achieved by following a dress code or generally coordinating appearances for people in any kind of media products like commercial photos, promotional videos, salespeople on video calls, and customers in testimonials. Nevertheless, this point could be extended to branding aspects of visible online assets of a company, such as websites, branded apps, social media, marketing emails, online ads, etc. Hence, a company should ensure appropriate and congruent implementation of its corporate branding and design to the above-mentioned communication channels (Kotler & Keller, 2012). Similarly, (2) it can be argued that following a specific sensorial concept that presents a company’s facilities as comfortable and attractive is equally important in an online setting, which entails providing an appealing sensory online experience to consumers (Khan et al., 2016). In an online-driven information environment, a company must present an attractive website to its target audience that is easy to navigate, is built upon appropriate graphical representation and content utility, and offers the expected functionalities (Garett et al., 2016). Regarding (3) modern and sophisticated equipment, consumers expect contemporary and not antiquated equipment or software. This means, besides presenting the expected easy-to-navigate, state-of-the-art responsive website design or branded app (Ryan, 2021), the consumer experience could be enhanced with more immersive metaverse experiences through virtual, augmented, or mixed reality, as well as including NFT extensions for certain products (Lee et al., 2021). From a promotional point of view, it may be expected for a company to communicate with its target audience via contemporary communication channels (Fill & Osmond, 2017). Lastly, (4) the degree of the overall atmosphere could be improved by providing consumers with a satisfying offline and online brand experience, which is based upon the preceding three points.

2.7. Process Management

Products are created and delivered to customers through effective processes. According to Lovelock et al. (2017), “a process describes the method and sequence of actions in which service operating systems work” (p. 1/23). Furthermore, processes can affect the delivery and, thus, the perceived quality of a product, which consequently can hurt relationships with customers, especially, if these are poorly delivered or of low quality (Kotler & Keller, 2012). In services marketing, the delivery of products can be undertaken through tangible or intangible actions and be directed at people’s bodies (people processing), people’s minds (mental processing stimulus), or they can be directed at people’s possessions (possession processing) or people’s assets (information processing) (Wirtz & Lovelock, 2022). Given the ubiquity of digital applications, this also applies to digital services marketing.

People processing includes tangible actions that are undertaken to physically present customers, who obtain benefits of the purchased product (Lovelock et al., 2017). In digital services marketing, the main difference is that the customer does not have to be physically present, but may be present via an online communication channel. Therefore, people processing could entail active engagement by the company with consumers through any two- or many-way communication channel, e.g., social media (Ryan, 2021). This became crucial with the Covid-19 pandemic in 2020. Certain merchants introduced a novel personal shopping experience through live video to bridge the communicative gap that was created because of lockdown measures; the augmented service enabled consumers to comfortably shop from their homes, which might be an additional service that companies may want to keep in their customer relationship management portfolio, as it positively influences shopping decisions (Wang et al., 2022). This applies to any tangible action with a customer.

Possession processing involves tangible actions that are made to physical possessions of customers, which includes value-adding activities occurring during the lifetime of the physical or digital possession (Lovelock et al., 2017). This could include the customization of physical products like sneakers, shirts, or photobooks through a web application or in a branded smartphone app. Similarly, possession processing can entail an account upgrade from, for example, a basic package for a cloud-storage service to a larger storage package. Also, an important process for digital platforms is the proactive update of software and apps to provide the best possible delivery of its digital service. However, depending on the perspective, such an update may be categorized as information processing (see respective section).

Mental stimulus processing encompasses intangible actions pointed at people’s minds like entertainment, sporting events, theatrical plays, and education (Lovelock et al., 2017). Customers need to be mentally present but can consume the product from anywhere they please, as long as they have online access. An obvious example includes the consumption of an entertainment product like a movie or series on TV or through an online streaming platform like Netflix. Watching YouTube for educational purposes could also be included in this category; for example, watching a video explaining how to apply a specific function in Microsoft Excel to learn a new skill, requires viewers to think while absorbing and processing the new material, before putting it into action (see Pine & Gilmore, 2020). A further media product directed at people’s minds could include advertisements across various digital channels. Based on the premise that advertising may mainly have a great influence in establishing brand awareness, brand imagery, and eliciting emotions (Batra & Keller, 2016), it can be argued that Nike’s 2022 campaign “Never Settle, Never Done” achieves the above-mentioned goals. It addresses the struggle for equality for girls and women and positions its brand to create an unmistakable image, and, consequently, evokes strong emotions through its outspoken commitment to contemporary issues (Cowan, 2022).

Information processing involves intangible actions directed at consumers’ assets, which may comprise operations such as data processing, billing, or consulting (Lovelock et al., 2017). The model suggests that the more uncertain a task is, the more information has to flow between decision-makers during the performance of the task to achieve a certain level of quality; however, if the task is clear from the beginning, it can be pre-planned, saving time and effort (Galbraith, 1974). Consequently, the delivery of the product should follow a clearly structured and transparent process that eliminates any kind of uncertainty and therefore diminishes the possible threat of customers being dissatisfied. An example can include the recurring billing of an online subscription for a service like Disney+, an on-demand over-the-top streaming service. The platform may offer various payment options, such as monthly or yearly through a credit card or PayPal. Offering a clear explanation of how the transaction occurs, limits uncertainty on the side of the customer; it might further increase trust that the process will be properly executed (see Yocco, 2016). The same can be applied to any other information processing. Sisodia and Chowdhary (2012) argue that visuals help better deliver messages with a high level of information. Similarly, Yocco (2016) posits that the ubiquity of digital media and the channels accessible to distribute messages, enable users to gather and share information with little or no effort. This is where Galbraith’s (1974) proposition of a transparent and clear information process becomes relevant in a digital context again.

2.8. Productivity and Quality

The last of the 8 Ps has been named differently across various literature, e.g., performance (Kotler & Keller, 2012), personalization (Goldsmith, 1999), and productivity and quality (Lovelock et al., 2017). Kotler and Keller (2012) see “performance as in holistic marketing, to capture the range of possible outcome measures that have financial and nonfinancial implications […], and implications beyond the company itself” (p. 26). This definition sets productivity and quality in marketing into a broader context and underlines the importance it has on the overall outcome of a company’s activities viewed from an internal and external perspective. A different view is offered by Goldsmith (1999), who speaks of the new marketing responsibility and contends that “the Personalisation decision is so important that it should be among the first decisions managers make so that the degree and nature of product personalization should guide subsequent marketing decisions” (p. 179). This means, the personalization opportunity for consumers will offer a unique product for every individual consumer. Lastly, Lovelock et al. (2017) combine both arguments and posit, “productivity relates to how inputs are transformed into outputs that are valued by customers, while quality refers to the degree to which a service satisfies customers by meeting their needs, wants and expectations” (p. 21); they add that service quality, as defined by customers, emphasizes how a product differentiates from a competing offer and therefore builds customer loyalty.

The key takeaway from the three definitions above is that productivity and perceived quality may increase, if companies offer personalization opportunities to consumers, which in the digital age equals additional interaction and engagement possibilities with the brand through digital channels. This notion finds indirect support in the experiential marketing concept by Schmitt (1999), in which interactive campaigns are intended to add experiential value to a brand experience, bolster brand satisfaction, and enhance brand loyalty. This is also highlighted by Pine and Gilmore (1998), who note, “Escapist experiences can teach just as well as educational events can, or amuse just as well as entertainment, but they involve greater customer immersion; acting in a play, playing in an orchestra, or descending the Grand Canyon involves both active participation and immersion in the experience” (p. 102). Therefore, it can be deduced that involving consumers in the online or offline co-creation process of a product or a brand experience, will empower them, make them feel more connected to the brand community, and ultimately makes them an integral part of the brand.

Ramaswamy (2008) suggests that co-creation between a brand and its customers should be based upon four elements: (1) dialogue between the brand and users, as well as between users; (2) access between the brand and users that addresses how to receive and experience the product; (3) risk-return for both users and the brand, because the personalization of a product can reduce the risk that a customer may not like the product, since it is co-created by the user; similarly, the company lowers the risk of losing a customer, because the perceived quality of the product is higher, given the customer enhanced it herself; and (4) transparency of information for users to have a stronger foundation upon which to build their perception of the company or brand.

In the context of digital services marketing, the following can be interpreted and applied: (1) Dialogue would see to the possibility for users and the brand to talk to each other through, for example, a website chat option like a chatbot; similarly, dialogue between users could be offered through comments and reply functions on shopping items. This could be of help when potential customers have questions about an item or want to consult the comments of previous buyers during their decision-making process. (2) Access refers to how the product shall be received and experienced. In the case of online clothes shopping, this could include the shopping experience offered to users, such as ease of navigation through the online shop, finding and altering features, or how much fun it is to shop on the website (Garett et al., 2016). A further perspective could be the ease of access to the website for shopping purposes from a smartphone; a responsive website design would be expected for a better user experience (Ryan, 2021). Furthermore, considerable value could be added to the user experience, for example, through access to an online app or software that allows users to personalize certain products. (3) The risk-return relationship is based upon the proposition that the risk of not liking the purchased product is minimized, because customers co-created the product to make it as much to their liking as possible (Goldsmith, 1999). In the case of clothing and accessories, personalization options could include changing the color of specific pieces of a product, like the sole of a sneaker, or printing or stitching a name on a bag. Regarding intangible products, for example, a mobile phone data plan, a user could simply upgrade or downgrade a certain option via the provider’s website. However, the question arises, of how much personalization is necessary to please users without diluting the branding aspect of the offered product (Goldsmith, 1999). Lastly, transparency is given when “all the information, which might be helpful to improve the outcome of the service experience” is provided (Solakis et al., 2017, p. 542). Simply put, a company should be adequately open to potential and current customers about how they conceptualize, produce, and promote their products. It could further be argued that total transparency would also include offering an overview of the price evolution of certain products, as well as costs incurred to produce them and the margins that are made. This is especially relevant in a Web 3.0 environment, where the “safe and transparent recordkeeping nature of blockchain [technology] is a potential game-changer for marketing” (Kotler et al., 2021, p. 103).

3. Conclusion

This chapter defined digital services marketing and how it can be applied through the 8 Ps of the services marketing mix. The main difference to a contemporary services marketing mix is the emphasis on digital characteristics of given products or their augmentations and the bridging of the offline and online environment through contemporary technology. It was argued that a general digital-first approach in marketing and the ubiquity of digital media not only stresses the obvious importance of the digital perspective for promotion and distribution activities but also for product conceptualization and pricing. It was highlighted that the technological evolution to a more immersive online environment, including virtual, augmented, or mixed reality opportunities, NFTs, and metaverse experiences, will incite consumers to expect respective enhanced products, which companies will need to deliver at least to a certain degree, if not completely, through digital channels. Although people connected to a brand or product may seem to be obviously grounded in an offline environment, contemporary technology allows them to be represented online via respective channels. Similarly, the meaning of physical evidence evolved to include online channels and other digital assets. Whereas the management of processes in the digital age may only have added new categories and extended some intangible applications, the productivity and quality component of the marketing mix has seen a more significant update. An increasing number of new virtual tools keep offering novel opportunities and possibilities to companies and consumers alike that need to be addressed to improve organizational effectiveness. Ultimately, marketers should be aware of the considerable impact that current technological advances have on general marketing activities for tangible and intangible products. With all of this in mind, it is crucial to create marketing strategies and tactics with consideration to the interwoven relationship between tangible products and intangible augmentations.

[1] A non-fungible token (NFT) is “a blockchain-based digital record representing a non-interchangeable digital or physical asset” that “has a unique identity with distinct qualities” (Li & Chen, 2022, p. 4).

[2] The Web 3.0 is said to converge technological advances from previous Internet eras, i.e., Web 1.0 and Web 2.0, including websites, mobile and smartphones, and social media, with new technologies such as blockchain, digital tokens, and virtual/augmented/mixed/extended reality (Hein et al., 2020; Kim, 2021).

References