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SERVICE MARKETING READING MATERIALS#1

INTRODUCTION
The world economy is increasingly characterized as a services economy. This is because of the
increased importance & the share of service sector in the economies of most developed &
developing countries. There has been a rapid shift from agriculture to industry & then to the
service sector. The shift has brought about a change in the definition of goods & services.
Goods are no longer considered separate from services but represent an integral part of the
product & this interconnectedness of goods & services are represented on a goods-services
continuum.
Everyday we interact with various economic activities like - getting courier delivered at the
requested address, making phone call to friend, relative, or client, having coffee at coffee shop,
or taking metro to commute office. Such activities are called services because they involve
deed or act and offered by one party to another for sale.
Services differ from goods in many ways. The way a product is produced, distributed,
marketed, and consumed is not the way a service is. Hence, a different marketing approach is
necessary for the marketing of services.
DEFINITION OF SERVICES
According to American Marketing Association services are defined as activities, benefits or
satisfactions which are offered for sale or provided in connection with the sale of goods.
According to Philip Kotler and Bloom services is defined as any activity or benefit that one
party can offer to another that is essentially intangible and does not result in the ownership of
anything. Its production may or may not be tied to a physical product.
Services are all economic activities whose output is not a physical product or construction. It is
generally consumed at the time it is produced & provides added value in forms such as
convenience, amusement, timeliness, comfort or health that are essentially intangible concerns
of its first purchaser.
CHARACTERISTICS OF SERVICES
1. Intangibility Services are cannot be touched or hold, they are intangible in nature. For
example you can touch your Smartphone. But, you cannot hold or touch the services of your
telecom service provider.
2. Inseparability In case of services the production, distribution, and consumption takes place
simultaneously. These three functions cannot be separated.
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3.

Variability It is impossible to provide similar service every time. Youll experience


some change every time you buy a particular service from a particular service provider. For
example Yesterday you had a coffee at CCD. Today, you are again at CCD to have a coffee,
but you have got different place to sit today; the person served you coffee is different today;
other people having coffee are also different today. Hence, your experience of having coffee
today is different as compared to yesterday.
4. Perishability You can store goods, but it is not so in the case of services. Services get
perished immediately.
5. Participation of customer Customer is co-producer in production of services. For delivery
customer involvement is as important as is of the service provider. For example if you went
to a parlor for haircut, how it cannot be possible without your presence and involvement.
6. No ownership In the sale of services, transfer of ownership not take place. It means to say
that consumer never own the services.
TYPES OF SERVICES
1. Core Services: A service that is the primary purpose of the transaction. Egg: a haircut or
the services of lawyer or teacher.
2. Supplementary Services: Services that are rendered as a corollary to the sale of a
tangible product. Egg: Home delivery options offered by restaurants above a minimum
bill value.
WHAT IS SERVICE MARKETING?
Service marketing is a broad category of marketing strategies focused on selling anything that
is not a physical product. This includes everything from personal services like medical care and
spa treatments, to the rental of vehicles and spaces, to experiences like concerts and dance
lessons. Any method that can communicate a service's appeal and benefits to customers is a
valid approach, including informational content, promotional deals, advertisements, and many
other kinds of marketing materials.
SERVICES MARKETING - DEFINITION AND ITS IMPORTANCE
Stated simply, Service Marketing refers to the marketing of services as against tangible
products.
As already discussed, services are inherently intangible, are consumed simultaneously at the
time of their production, cannot be stored, saved or resold once they have been used and
service offerings are unique and cannot be exactly repeated even by the same service provider.
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Marketing of services is a relatively new phenomenon in the domain of marketing, having


gained in importance as a discipline only towards the end of the 20th century.
Service marketing first came to the fore in the 1980s when the debate started on whether
marketing of services was significantly different from that of products so as to be
classified as a separate discipline. Prior to this, services were considered just an aid to the
production and marketing of goods and hence were not deemed as having separate relevance of
their own.
The 1980s however saw a shift in this thinking. As the service sector started to grow in
importance and emerged as a significant employer and contributor to the GDP, academics and
marketing practitioners began to look at the marketing of services in a new light. Empirical
research was conducted which brought to light the specific distinguishing characteristics of
services.
By the mid 1990s, Services Marketing was firmly entrenched as a significant sub discipline of
marketing with its own empirical research and data and growing significance in the
increasingly service sector dominated economies of the new millennium. New areas of study
opened up in the field and were the subject of extensive empirical research giving rise to
concepts such as - the product-service spectrum, relationship marketing, franchising of
WHO USES SERVICE MARKETING?
All organizations that provide services of some kind use services marketing strategies. These
fall into the two, broad categories: organizations that provide services to individuals (businessto-customer, or B2C), and organizations that provide services to other organizations (businessto-business, or B2B).
Service marketing is most commonly used by companies that sell to individuals. They research
consumer behavior to create advertisements that appeal to certain demographics, allowing
companies to narrow the marketing focus to a concentrated effort. For example, a company
that provides swing dance lessons would use services marketing strategies to research what
kinds of people are most interested in swing dancing, and then create advertising materials and
promotions designed to appeal specifically to those kinds of people.
Organizations that provide services to other organizations will apply these marketing
techniques in their industrial marketing efforts -- a field dedicated to B2B marketing efforts.
This usually requires an approach that involves more person-to-person contact, as a sales
representative from the service provider negotiates with a representative from the client
business. A company that provides technical support for another company's computers, for
instance, would use services marketing to convince clients that its service is somehow
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necessary or a good investment. This is likely to include meetings, presentations, and contract
negotiations in addition to creating advertising materials that appeal to businesses that use
computers.

USING SERVICE MARKETING


Regardless of what specific kinds of advertising and sales techniques a company uses in
conjunction with services marketing, the general plan will follow three steps: Research,
Materials, and Evaluation.
Once a company compiles and review market research data, it can create marketing materials
based on the message it believes will appeal to a target demographic.
The final step in a services marketing plan is to evaluate the success of the plan. The service
provider should set specific goals for sales, conversion rates, advertising cost per customer, and
other concrete metrics. After a certain period of time, the campaign should end and the
company should measure any changes in the metrics it hoped to effect with the marketing
campaign.
MARKETING OF SERVICES
A different marketing approach is necessary for services marketing, because services differ
from goods in many respects.
Basis
Tangibility
Separability

Ownership
Perishability
Heterogeneity

Difference between Services and Goods


Services
Goods
Services are intangible in nature. Goods are tangible in nature. They
They cannot be touched or hold.
can be touched and hold.
Services are inseparable in nature. Function of distribution and
Production, distribution, and consumption of goods can be
consumption of service take place separated from the function of
simultaneously.
production.
Services cannot be owned. They Goods can be owned.
can be hired for a specific time
period.
Services get perished after a Goods can be stored for future use.
specific time period. It cannot be
stored for future use.
Services are more heterogeneous. Goods are less heterogeneous. It is
It is very difficult to make each possible to make each goods
service identical.
identical.
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Customer Service in a service firm is highly interactive in nature. Customer interacts with the
firm physical facilities, personnel, and tangible elements like the price of the service. The
success of any service firm depends on how its performance is judged and perceived by the
customer. Today, Service Firms are becoming highly competitive, so, it is essential for service
firms to provide high quality services for their survival.
IMPORTANCE OF MARKETING OF SERVICES
Given the intangibility of services, marketing them becomes a particularly challenging and yet
extremely important task.
A key differentiator: Due to the increasing homogeneity in product offerings, the attendant
services provided are emerging as a key differentiator in the mind of the consumers. Egg: In
case of two fast food chains serving a similar product (Pizza Hut and Dominos), more than the
product it is the service quality that distinguishes the two brands from each other. Hence,
marketers can leverage on the service offering to differentiate themselves from the competition
and attract consumers.
Importance of relationships: Relationships are a key factor when it comes to the marketing of
services. Since the product is intangible, a large part of the customers buying decision will
depend on the degree to which he trusts the seller. Hence, the need to listen to the needs of the
customer and fulfill them through the appropriate service offering and build a long lasting
relationship which would lead to repeat sales and positive word of mouth.
Customer Retention: Given todays highly competitive scenario where multiple providers are
vying for a limited pool of customers, retaining customers is even more important than
attracting new ones. Since services are usually generated and consumed at the same time, they
actually involve the customer in service delivery process by taking into consideration his
requirements and feedback. Thus they offer greater scope for customization according to
customer requirements thus offering increased satisfaction leading to higher customer
retention.
SERVICE MARKETING MIX/EXTENDED MARKETING MIX
An expanded marketing mix for services was proposed by Booms and Bitner (1981),
consisting of the 4 traditional elementsproduct, price, place, and promotion and three
additional elementspeople, process and physical evidence.
The service marketing mix is also known as an extended marketing mix and is an integral part
of a service blueprint design. The service marketing mix consists of 7 Ps as compared to the 4
Ps of a product marketing mix. Simply said, the service marketing mix assumes the service as
a product itself. However it adds 3 more Ps which are required for optimum service delivery.
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The product marketing mix consists of the 4 Ps which are Product, Pricing, Promotions and
Placement. The extended service marketing mix places 3 further Ps which include People,
Process and Physical evidence. All of these factors are necessary for optimum service delivery.
The Service Marketing Mix Comprises Of The 7ps. These Include:
Product
Price
Place
Promotion
People
Process
Physical evidence.
Product The product in service marketing mix is intangible in nature. Like physical products
such as soap or a detergent, service products cannot be measured. Tourism industry or the
education industry can be an excellent example. At the same time service products are
heterogeneous, perishable and cannot be owned. The service product thus has to be designed
with care. Generally service blue printing is done to define the service product. For example
a restaurant blue print will be prepared before establishing a restaurant business. This service
blue print defines exactly how the product (in this case the restaurant) is going to be.
Place Place in case of services determine where is the service product going to be located.
The best place to open up a petrol pump is on the highway or in the city. A place where there is
minimum traffic is a wrong location to start a petrol pump. Similarly a software company will
be better placed in a business hub with a lot of companies nearby rather than being placed in a
town or rural area.
Promotion Promotions have become a critical factor in the service marketing mix. Services
are easy to be duplicated and hence it is generally the brand which sets a service apart from its
counterpart. You will find a lot of banks and telecom companies promoting themselves
rigorously. Why is that? It is because competition in this service sector is generally high and
promotion is necessary to survive. Thus banks, IT companies, and dotcoms place themselves
above the rest by advertising or promotions.
Pricing Pricing in case of services is rather more difficult than in case of products. If you
were a restaurant owner, you can price people only for the food you are serving. But then who
will pay for the nice ambience you have built up for your customers? Who will pay for the
band you have for music? Thus these elements have to be taken into consideration while
costing. Generally service pricing involves taking into consideration labor, material cost and
overhead costs. By adding a profit mark-up you get your final service pricing.
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People People is one of the elements of service marketing mix. People define a service. An
essential ingredient to any service provision is the use of appropriate staff and people.
Recruiting the right staff and training them appropriately in the delivery of their service is
essential if the organization wants to obtain a form of competitive advantage. Consumers make
judgments and deliver perceptions of the service based on the employees they interact with.
If you have an IT company, your software engineers define you. If you have a restaurant, your
chef and service staff defines you. In case of service marketing, people can make or break an
organization. Thus many companies nowadays are involved into specially getting their staff
trained in interpersonal skills and customer service with a focus towards customer satisfaction.
Process Refers to the systems used to assist the organization in delivering the service.
Service process is the way in which a service is delivered to the end customer. Lets take the
example of two very good companies McDonalds and FedEx. Both the companies thrive on
their quick service and the reason they can do that is their confidence on their processes. On
top of it, the demand of these services is such that they have to deliver optimally without a loss
in quality. Thus the process of a service company in delivering its product is of utmost
importance. It is also a critical component in the service blueprint, wherein before establishing
the service, the company defines exactly what should be the process of the service product
reaching the end customer.
Physical Evidence The last element in the service marketing mix is a very important
element. It is an essential ingredient of the service mix; consumers will make perceptions based
on their sight of the service provision which will have an impact on the organizations
perceptual plan of the service. As said before, services are intangible in nature. However, to
create a better customer experience tangible elements are also delivered with the service.
Take an example of a restaurant which has only chairs and tables and good food, or a restaurant
which has ambience lighting, nice music along with good seating arrangement and this also
serves good food. Which one will you prefer? The one with the nice ambience. Thats physical
evidence. Several times, physical evidence is used as a differentiator in service marketing.
Imagine a private hospital and a government hospital. A private hospital will have plush offices
and well-dressed staff. Same cannot be said for a government hospital. Thus physical evidence
acts as a differentiator.
CATEGORIES OF SERVICE MIX
As we all know, service is any act or performance that one party can offer to another that is
essentially intangible and does not result in the ownership of anything. Its production may or
may not be tied to a physical product. It is like having a massage on your body or manicures
your hands. Service is kind of product wherein we used it to fulfill one's needs and wants
without having them a physical evidences.
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These are the five categories of offerings that feature the service. The component can be minor
or a part of the total offering.
1. Pure tangible good - these are offering that consist tangible goods primarily. There will be
no services accompany by the product. (Such as soap, toothpaste, or salt.)
2. Tangible good with accompanying services - this offering consists one tangible good
accompanied by one or two services.
3. Hybrid - the offering consist of equal parts of goods and services.
4. Major Service with accompanying minor goods and services the offering consist of a
major service along with additional services or supporting goods.
5. Pure service the offering consist primarily of a service.
TYPES OF SERVICE MARKETING STRATEGIES
Marketing a service differs from promoting a tangible product because consumers often need
to be educated about a service. Service marketing often requires more explanation as to why
the customer needs the product, how it works and why you are the best entity to deliver the
service. If you're a solo entrepreneur, selling a unique skill you have, you're even more under
the gun to explain what you do. Using a multi-pronged educational approach for marketing a
service will be your best bet to boost sales.
-REFERRALS
One of the best ways to market an intangible is through word of mouth. A happy customer will
not wait to be asked about a service from friends and will often want to share her experience
and tell people why she likes the service. Some service providers use referral programs as an
integral part of their marketing. You can offer clients a cash bonus for each referral they send to
you, offer them a free service for each lead or offer their friends a reduced rate on service if
they mention the customer.
-EDUCATION
Another way to market a service is to provide customer education. You can do this by offering
free seminars, lunch-and-learns or other educational meetings. You can write articles for
magazines and newspapers and give talks at trade shows and conferences. With an educational
marketing strategy, you do not emphasize your product features or prices, but the benefits of
using the service. For example, if you own a dog grooming business, you might write articles
for local newspapers discussing the effects of pet fleas on a familys health and a pets wellbeing, showing how regular grooming can alleviate these problems.
-DEMONSTRATIONS
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Customers might be gun shy about trying a service if they arent sure what they are getting.
Offering free demonstrations helps ease their concerns and can result in immediate sales. For
example, if you offer personal training, you might contact a large company with a wellness
program and offer to give an employee talk and free exercise class. If you offer public relations
services, you might offer meet with a business owner, discuss his current marketing strategy
and suggest PR initiatives he could try and outline the cost to do so.
-SOCIAL MEDIA
Social media are hard to escape, with millions of people sending texts and emails to friends
when they see interesting items they want to share. They can also be an inexpensive way for
smaller businesses with few advertising dollars to make an impact. A social media marketing
strategy lets service providers take advantage of free tools such as Facebook and Twitter to
educate consumers and get them to spread the word to their network of contacts. With
Facebook, for example, you can create a free business page that lets you detail your service.
Put customer testimonials and case histories on your page or run contests offering a cash prize
or a free session or visit. Place Facebook "Like" buttons on your website pages to encourage
visitors to share what they find with friends. Send Twitter messages that give customers free
tips. For example, a landscaper might tweet, "Watering your lawn more than once per week
isn't necessary. Once a week for 30 minutes is all you need."
WHAT IS A SERVICE MARKETING TRIANGLE?
The marketing and selling of services requires a special set of tactics and priorities compared
with selling physical products. The service marketing triangle breaks the marketing tasks of
your business down into three types. As a service business, you must market both to your
employees so they understand the focus of your business and to your customers so they do
more business with you.
Service Marketing Trianglea dynamic model where there are three interlinked groups that
works together to develop, promote, and deliver services. These key players are labeled on the
points of the triangle Company, Customer, Providers. Between these three points on the
triangle, there are three types of marketing that must be successfully carried out for a service to
succeed external marketing, internal marketing, and interactive marketing. All these activities
revolve around making and keeping promises to customers. For services, all three types
of marketing activities are essential for building and maintaining relationships with customers.
Points of the Triangle
Each side of the service marketing triangle represents a type of marketing, and the types
interact between the entities on the points where the sides meet. At the top of the triangle sits
your business organization. At each corner at the bottom of the triangle are your customers and
your employees who interact with and provide the services to your customers.

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EXTERNAL MARKETING-MAKING PROMISES


External marketing goes from your business organization out to customers and prospective
customers. This is the traditional form of business marketing, showing customers how the
services provided by your business benefit them. External marketing includes advertising, your
website and your company's social media efforts. The purpose of external marketing is to fill
the business pipeline with future business.
Through these efforts a company makes promises to its customers regarding what they can
expect and how it will be delivered. Traditional marketing activities such as advertising, sales,
special promotions, and pricing facilities this type of marketing, but for services, other factors
also communicate the promises to customers. The service employees, the design and decor of
the facility, and the service process itself also communicate and help to set customer
expectation. Service guarantees and two-way communication are additional ways of
communicating service promises.
INTERACTIVE MARKETING-KEEPING PROMISES
The side of the triangle between your employees and customers is called interactive marketing.
This form of marketing revolves around how your employees deliver the services your
company provides. The goal is to have highly satisfied customers who become long-term,
repeat customers. The effectiveness of the interactive marketing relates back to the internal
marketing efforts of your business. Interactive marketing is also how your employees keep the
promises made by your external marketing effort.
External marketing is just the beginning for services marketers promises made just to keep.
Keeping promises is the second type of marketing activities captured by the triangle and is the
most critical from the customers point of view. Services promises are most often kept or
broken by the employees of the firms or by the third party providers, most often in real time.
Sometimes service promises are even delivered through technology. Interactive marketing
occurs in the moment of truth when the customer interacts with the organization and the
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service is produced and consumed. Interestingly, promises are kept or broken and the reliability
of service is tested every time the customer interacts with the organization.
INTERNAL MARKETING-ENABLING PROMISES
Internal marketing is the side of the triangle between your organization and your employees
who provide your services to customers. Marketing issues include adequate training on the
services to be delivered and customer satisfaction service techniques. Internal marketing
requires you to be involved with your employees and let them know the goals and even
problems facing the business. Internal marketing also can include a performance rewards
system for employees who deliver the highest level of customer service.
This is the third phase that takers place through the enabling of promises. In order for providers
and service systems to deliver on the promises made. They must have skills, abilities, tools,
and motivation to deliver. In other words, they must be enabled. These essential services
marketing activity has become known as internal marketing. Promises area to make, but unless
providers are recruited, trained, provided with tools and appropriate internal systems, and
rewarded for good service, the promises may not be kept. Internal marketing also hinges on the
assumption that employee satisfaction and customer satisfaction are inextricably linked.
SERVICE MARKETING OBJECTIVES
Unlike with marketing a tangible product, marketing a service or service-oriented business
poses the challenge of creating interest without the luxury of appealing to the five senses.
Consequently, marketers and business owners must develop a different set of objectives than
when marketing products. In essence, service marketing requires a more personalized approach
to be successful.
DEVELOPING TRUST
One primary focus of service marketing is to develop relationships with customers to gain their
trust. Insurance agents, for example, sell an intangible product that promises to fulfill a future
need. Consequently, insurance agents often attempt to market themselves as trustworthy
individuals who will always be there for the policyholder. Agents take the time to get to know
their policyholders and learn about their families. They frequently become involved in their
local communities and participate in charitable activities.
OFFERING VALUE
Service-oriented companies do not have the advantage of luring customers with flashy
products loaded with attractive features. Instead, they must use marketing to highlight the value
of the services they provide. One way to increase the value is to bundle several services
together and offer them as a package. Continuing with the insurance industry example, many
insurance companies offer discounts to customers who purchase more than one policy, such as
a combination of auto and homeowners coverage.
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STAYING CONNECTED
Service businesses can use marketing to keep the lines of communication open and provide
relevant information to their customer base. Businesses can use methods such as sending
regular email newsletters to their customers that contain information about industry trends that
could impact their lives. This enhances the business's image as a service-oriented company that
is concerned about the well-being of its customers. It also helps to keep the company in the
forefront of the customer's mind, which can lead to repeat business in the future.
DIFFERENTIATION
Service marketing can focus on what makes your business different from the competition. This
serves to inform the customer as to what advantages your business offers that others cannot.
For instance, you can highlight fact that you possess a higher level of expertise in the business
or that you have served your local community for a longer period of time. Showing that you're
different can also help you carve out a niche in the marketplace, helping you to target your
marketing strategy.
8 ELEMENTS OF SERVICE MARKETING
When you market a service instead of a product, you have to consider many more elements in
your marketing approach. If you use the same approach to marketing a service that you would
use for a product, you will find you have overlooked important market forces that govern
services. Savvy buyers expect you to cover all your bases when selling a product to them, so
know what those bases are.
Service marketing is different from product marketing. Service firms are marketing something
that is intangible -- something that the client cannot experience until the firm has delivered it.
Some of the elements of service marketing mirror those of product marketing; however, there
is a greater emphasis in the service sector on people, relationships and problem solving.
PRODUCTS
Service firms offer standard products, such as consultancy, accounting, financial services,
training and maintenance. Clients can purchase the services for a period of time based on the
number of hours or days or for a specific project. Service firms can offer general services for
all markets or develop versions for different market sectors.
Your product requires a process performed by service providers. It is intangible. It does not
exist unless you do something. This means your marketing must emphasize your performance
and explain why it is superior in quality, price or both to the competition's offerings. In your
marketing messages, use active verbs that describe the actions you take. If you offer consumer
research, you could say, We locate your target customer, solicit the vital information you need
and deliver it to you in a timely manner. The words locate, solicit and deliver indicate
actions you take in providing your service.
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SPECIALIZATION
Specialization is an important factor in service marketing, according to a 2010 study by
consultancy Hinge Marketing, "The High Growth Professional Services Firm." The study
found that firms offering a narrow range of services to specific market sectors had faster
growth rates and greater profitability than broadly-based service firms.
PROBLEM SOLVING
Marketing services as products can be limiting, according to Clearsight Consulting. Instead
firms should position their services as customized solutions to specific problems. This element
of service marketing enables a firm to differentiate itself through its skills and experience
rather than a range of standard services.
KNOWLEDGE
The emphasis on problem solving makes knowledge an important marketing element. Firms
should use their knowledge and skills to build credibility in the market. By publishing articles,
blogs and papers or speaking at conferences, firms can establish a reputation for thought
leadership that provides an important competitive advantage.
PEOPLE
To achieve thought leadership and deliver high-quality problem solving solutions, service firms
depend on people. Authors Christopher Lovelock and Joachim Wirtz in their book, "Services
Marketing: People, Technology, Strategy," emphasize people as one of the most important
elements of service marketing.
RELATIONSHIPS
Quality people also form an integral part of a service firm's relationship marketing program.
Firms aim to establish relationships with clients at a senior level so that they can position their
services as strategically important. Relationship marketing is also important to building
continuity of business and protecting the firm's client base.
VALUE
Service firms emphasize value rather than price as a marketing element. A pitch to a client
should focus on the business benefits a client will achieve as a result of a service project. A
training service, for example, can improve a client's skill base; a marketing consultancy service
can help the client focus on profitable growth markets.
PLACE
Place is an important marketing element for some service firms. Firms specializing in industryspecific service, for example, would locate close to the main center. Silicon Valley is a favorite
location for technology consulting firms while New York would be an important location for
financial services firms. Firms offering services to multinational clients would set up offices or
work with associates in their clients' key territories to provide a local service.
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