There are four central components of a service marketing strategy.

promotional items Reds Tips1. Target market segmentation
This entails breaking down the potential market into segments;
* Matching the customer needs and price sensitivity
* Choosing the most attractive segment by its size, average profit and fitting into the firm's capabilities.
* Researching the latent wants of customers and identifying the problems they face i.e. good quality service, and how well your competitors are servicing the expectations of customers.

2. Differential advantage
After defining the market, a positional concept has to be created. The concept should be based on the most important attribute: will the customer acknowledge the difference immediately from your competitor. For example Outsurance - "you will always get something out" or KFC 'Finger-licking good" or a simple one "customer satisfaction".
The concept should have sustainability as services are easily copied and improved by stronger firms.

3. Operating strategy
This should transform a marketing opportunity into high performance for the firm. A few points to consider;
* Search for value-cost leverage - maximise the offering and the cost in providing the service
* Develop the design for service delivery
* Create a strategy system that integrates the delivery system and the positioning strategy
* Create a central vision with employees to build performance quality

4. Service marketing mix
The last step is to create a marketing mix using product, price, place /distribution and promotion.

Product
Services are intangible, therefore is often difficult to understand the service being offered and the quality of service in advance. An effective way to generate confidence is to highlight the tangible aspects such as friendly staff and atmosphere. The contact personnel should look right and reflect the image of the firm.

Price
Price plays a psychological and economic role. The former is used as a cue for quality and the latter is the firm's revenue and profits.
Most markets are highly segmented by price  For example, the airlines will charge different rates depending on the time of day and the time of booking.

Promotion
Intangibles are difficult to advertise. The one solution is to choose symbols and tangibles so the customer will associate with the characteristics of the service. Direct selling is a powerful tool for service firms as well as personal selling.

Place/Distribution
High contact services have to be distributed directly because consumers and suppliers have to meet. Economies of scale can be achieved by using an indirect distribution with computer-based technology such as travel agents and ATM's.

Growth
Multi-site strategy - franchises
Multi-service strategy - offering new services i.e. accounting firms offer taxation and estate management advice.
Multi-segment strategy - the firm uses the spare capacity to sell its services to new types of customers i.e. construction firms renting out their spare plant for hire.
Mixed strategies - to use combined strategies such as McDonald's. They have expanded the number of locations, developed new offerings and new segments with their range of chicken burgers designed to offset the trend of decreased red meat consumption.