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Services Marketing

Services Marketing

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12/09/2012

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Prof. M C. Rashid Khan, GSBA, Greater Noida, UP
Services Marketing
 
Study Material
1.
 
R
ecognize the major changes occurring in the service sector and how theyimpact competition.
The service sector is going through a period of almost revolutionary change and many service businesses are struggling to cope with an increasingly competitive environment. The mostdramatic changes can be explained by the forces outlined in Fig. 1±3, including changing patterns of government regulation; privatization of former state-owned corporations in manycountries; social changes, advances in IT; internationalization and globalization; and such business trends as pressures to improve productivity; the service quality movement; expansion of leasing and rental businesses; the growing role of manufacturers as service providers; the needfor public and nonprofit organizations to find new income; and innovative hiring practices.Technology in all its forms is a key driver of service innovation.Customer needs are evolving, markets and competition are changing rapidly, and effectivestrategic leadership is vital to success. Students should recognize that understanding the threatsand opportunities posed by these challenges is a vital first step in developing effective strategies.In particular, the increasingly competitive nature of many service industries places a premium oneffective marketing strategy.
2.
 
Is it possible for an economy to be entirely based on services? Is it good for an economy to have alarge service sector? Discuss
.
 
Y
es it is, in theory, particularly if the population is educated and a good infrastructure exists. Some smallisland nations (e.g., Bermuda, Cayman Islands) now base their economies around tourism and financialservices, plus retail, transportation, professional and personal services, health, education, andgovernment. Manufactured products, fuels, and foodstuffs can always be imported. A service sectorthat accounts for a high proportion of GDP is a hallmark of many nations like the United States that havea high standard of living. The U.S. economy has grown even as the manufacturing sector has shrunk. Thedownside is that a country becomes less self-sufficient, which may constitute a threat to nationalsecurity. Moreover, if there are substantial imports of the food, fuels, and manufactured goods neededto support both the local and visiting population and to enable the local service industries to function,then there will be a serious balance of payments problem unless the country can generate sufficientforeign earnings from tourism and export of services to other countries.
3
.
 
hat are the main reasons for the growing share of the service sector in all major economies of the world? 
Increased productivity and automation in agriculture and industry, combined with growingdemand for both new and traditional services, have jointly resulted in a continuing increase over time in the percentage of the labor force that is employed in services. Increased international
 
Prof. M C. Rashid Khan, GSBA, Greater Noida, UP
trade and tourism drives demand for freight and passenger transportation, international finance,communications, and hotel entertainment, and food services. Increased spending on services byindividuals is often associated with higher standards of living. People eat out more, take morevacations, spend more on entertainment, and employ other people to undertake household choresthey used to undertake for themselves. Similarly, as companies become larger and moresophisticated, they may choose to outsource so-called
internal services
such as recruitment, legaland accounting services, payroll administration, office cleaning, landscape maintenance, supply-chain management, advertising, etc. to specialist subcontractors. When such tasks areoutsourced, they become part of the competitive marketplace and are therefore more easilyidentifiable as contributing to the services component of the economy. Technology has resultedin the creation of entire new service industries.
4
.
 
hy is time so important in services? 
Many services are delivered in real time, so they cant be stocked for use at a later date. This means thatservice managers must try to match service supply with service demand in order to make the best use of their employees and facilities and to maximize profits. If customers have to be physically present toreceive services (like cinemas, amusement parks, restaurants, etc.), there are limits on how long theywill be willing to wait. Even if service delivery takes place without the customers presence, they haveexpectations about how long a specific service should take to completewhether it is repairing adysfunctional computer, changing the oil in a car, or preparing a legal document. Speed has become akey aspect of both good service and competitive positioning, because todays busy customers areincreasingly time sensitive. Its useful to get students talking about their own priorities in terms of timefor different types of services as well as their views on how well or badly service firms understandcustomers time budgets.
5
.
 
hy do marketing, operations, and human resources have to be more closely linked in servicesthan in manufacturing? Give examples
.
 
Marketing is usually separated from the operations and human resources functions in a manufacturingbusiness, where goods are usually produced in a factory and then distributed and sold at a separatelocation. In a service organization, customer involvement in the production process and the fact thatother customers and employees are often part of the product blur the lines between these functionalareas.Customer satisfaction with many services often centers on the quality of the staff and whether theprocesses in which they themselves are involved are user-friendly. Students will probably choose high-contact services like hotels, education, restaurants, or airlines to illustrate these points, but theinstructor may wish to ask if the same observations applies to low-contact services like Internetproviders, telecommunications vendors, and express delivery services (like UPS or FedEx). The fewer theperson-to-person contacts (face-to-face or by phone) with customers, in fact, the more important it isthat such contacts be customer focused. To the extent that self-service systems require customers to dosome of the work for themselves, its important that the operation be designed in a user-friendlymanner.
 
Prof. M C. Rashid Khan, GSBA, Greater Noida, UP
6
.
 
M
ake a list of at least 1
2
services that you have used during the past month
.
 a)
 
Categorize them by type of process
.
 b)
 
In which instances could you have avoided visiting the service factory and instead obtained service at arms length? Comment 
.
 
c)
 
 How did other customers affect your own service experiences²either positively or negatively?
Students should be able to come up with a reasonable number of services to analyze. Their lists arelikely to include a number of food, entertainment, and leisure services in addition to such activities asusing a telephone, mailing letters, riding public transportation, going to school, using library and athleticservices, visiting a bank or ATM, getting a haircut, taking clothes to the cleaners or to a self-servicelaundromat, and so forth. There may also be use of professional services (e.g., lawyer, doctor,counselor). Some students may be confused about the distinctions between the four processingcategories, so its worth spending some time reviewing their examples. The key, of course, is to focus onthe core service (Fig. 15). For instance, the core product of a movie theater is providing mentalstimulus even though the nature of this form of entertainment is that it requires customers to come tothe service factory in person for an experience that may also include eating popcorn, ice cream, orbeverages. Students may also identify several types of processes for the same servicevisiting a retailbank branch, using an ATM, making transactions by telephone, and doing home banking on the Internet.
.
 
isit the facilities of two competing service firms in the same industry (e
.
g
.
 , two retailers,restaurants, or hotels) that you believe have different approaches to service
.
Compare and contrast, using one or more of the frameworks in this chapter 
.
 
Among the differences that students are likely to identify are greater or lesser degrees of self-service,variations on any of the elements of the 7Ps, relative emphasis on tangibles versus intangible elements,and use of the Internet as a communications tool. The discussion of retailers may also include rental(non-ownership) vs. sale of certain items. Its possible that a few students may address the issue of corporate values and ethical treatment of customers.
.
 
hat actions could a bank take to encourage more customers to bank by phone, mail, Internet, or  AT 
M
s rather than visiting a branch? 
Students may suggest additional fees or costs for visiting a teller in a branch. Alternatively, price andpromotional incentives could be provided to encourage customers to use more desirable servicedelivery options (at least from the companys viewpoint) like phone, mail, Internet or ATMs in non-branch locations. The banks management could also educate consumers about how to use thesealternatives and ensure that the service processes are both convenient and user-friendly. Managersshould also consider conducting research to find out why customers resist use of new deliverymethodsthere may be different reasons for different segments, requiring different responses. In classdiscussion, try to get students to talk about why they dont use certain delivery options and what wouldbe needed to make them change their behavior. For instance, the great majority of students willprobably be willing to use an ATM to withdraw money, but our experience suggests that only a smallminority will be willing to use an ATM to make deposits.

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