SERVICE

MARKETING

Manu Priya
manupriya@imi.ac.in
GROWTH & IMPORTANCE OF
SERVICE

Every business is a service business;

You are not a chemical company. You are
a chemical services business.”
Philip Kotler,
 How Important is the Service Sector in
Our Economy?
• The size of the service sector is increasing in almost all economies around
the world.
• Services make up the bulk of today’s economy and also account for most
of the growth in new jobs.
• Even in emerging economies, service output is growing rapidly and often
accounts for half or more of GDP.
• Jobs range from high-paid professionals and technicians to minimum-wage
positions.
• Service organizations can be any size –
from huge global corporations to local
small businesses.
 Changing Structure of Employment as Economic Development Evolves
Share of
Employment
Agriculture

Services

Industry

Time, per Capita Income Source: IMF, 1997

• More than 75% of US work force employed in
Service Sector.
• India accounts for 41% of its GDP.
• Despite steady rate of high growth of service
sector, its productivity growth remains less
than 1%, reactively low compared to the
manufacturing.
• Human factor may have extra room for
improvement of productivity in terms of:

 Delivery of customer value

 Operational efficiency
 Internal Services
• Service elements within an
organization that facilitate creation of
– or add value to – its final output
• Includes:
– Accounting and payroll
administration
– Recruitment and training
– Legal services
– Transportation
– Catering and food services
– Cleaning and landscaping
• Increasingly, these services are
being outsourced
 Major Trends in Service Sector (Fig. 1.3)
• Government Policies (e.g., regulations, trade agreements)
• Social Changes (e.g., affluence, lack of time, desire for experiences)
• Business Trends
– Manufacturers offer service
– Growth of chains and franchising
– Pressures to improve productivity and quality
– More strategic alliances
– Marketing emphasis by nonprofits
– Innovative hiring practices
• Advances in IT (e.g., speed, digitization,
wireless, Internet)
• Internationalization (travel, transnational
companies)
 Some Impacts of Technological Change
• Radically alter ways in which service firms do business:
– with customers (new services, more convenience)
– behind the scenes (reengineering, new value chains)
• Creation of an information assembly line
– Information today can be standardized, built to order,
assembled from components, picked, packed, stored,
and shipped, all using processes resembling
manufacturing’s
 Feature of Service Sector
• Highly employee oriented
• Mostly under govt. control
• Changing life style & technology- attracting large
share of consumers spending.
• More than half of consumer’s expenditure on
service.
• With the growth of service sector, prices for services
has been going up.
• It is important to learn:
Marketing of Services Service Delivery
Service Quality Service Management
Service Marketing
Environment:
The PEST Impact
PEST Impact
 POLITICAL-LEGAL ENVIRONMENT

• Service firms are being subject to govt. regulations:

* Price discrimination * Taxes
* Restrictions on promotion * Legislation
• Regulation influences range & type of competition
• Pressure groups effect, change or modify the
directions being taken by regulatory bodies.
•
 ECONOMIC ENVIRONMENT

• Changing life style, changing world,

technological advances, changing consumer
needs.
• The innovations in Science & Technology
have altered productivity needs.
• Urbanization has widened the demand for
private & public sector.
• Some services need a specialist approach.
i.e Marketing Research, Ad Agencies.
 SOCIO-CULTURAL ENVIRONMENT
• Factors like social values, belief effects intensive
use of Consultant, counselor, psychotherapy
etc.
• Status attach to the services.
• Health, beauty, travel, culture, higher education
have replaced as status symbol.
• There is an increasing trend in services like
security, insurance, legal, medical & investment.
• Services firms may need to adapt their offerings
to suit local tastes
 TECHNOLOGICAL ENVIRONMENT
• Economic growth has resulted from
increases in productivity developments.
• Technology influenced our lifestyles,
consumption pattern & economic wellbeing.
Eg. Tech. at McDonald’s is making it possible
for our restaurants to offer more food
choices.
 COMPETITIVE ENVIRONMENT

• Competitive environment can be studied in

the light of five forces:
• The intensity of direct competitive rivalry
• The threat from alternatives
• The threat from new entrants
• The bargaining power of buyers
• The bargaining power of suppliers
 REASONS FOR GROWTH IN SERVICE
SECTOR
• Lifestyles, changing world, changing
economies, technological advances,
modernization, liberalization, privatization
& globalization policies.
• Complexity of products
• Overall affluency, shift towards leisure b&
pleasure created recreational.
Changing
Life Style
Changing
World
 Changing
Economies
 Changing
Technology
Defining the Essence of a Service
• An act or performance offered by one party to another
• An economic activity that does not result in ownership
• A process that creates benefits by facilitating a desired
change in:
– customers themselves
– physical possessions
– intangible assets
 Goods - things you can touch -
“tangible”
Services - things you can’t touch - but
you can see their effect “intangible”
“… services are not physical, they are
intangible…”
 Service

 A Service is a type of a product.

“… a deed performed by one party for

another…”
 Discussions about the marketing of
goods apply to services as well.
 Services have special characteristics
that make them different than products.
 Distinguishing Characteristics of Services

• Customers do not obtain ownership of services

• Intangible elements dominate value creation
• Greater involvement of customers in production process
• Other people may form part of product experience
• Greater variability in operational inputs and outputs
• Many services are difficult for customers to evaluate
• Service products are ephemeral and cannot be inventoried
• Time factor is more important--speed may be key
• Delivery systems include electronic and physical channels
Managing Services Requires Collaboration between Marketing, Operations, and HR
Functions

Operations Marketing
Management Management

Customers

Human Resource
Management
• What is Customer Loyalty?
• Loyal customer is one who
• · Makes regular purchases (Repeat business)
• · Purchases across product and service lines (Share of Wallet)
• · Refers others (Word of Mouth or Referenceability)
• · Demonstrates immunity to the pull of the competition (Retention)
• Four stage model of loyalty (Oliver, 1997, 1999) – sequence of
• distinct phases cognitive, affective, conative (intentional), action
• (behavioral)
• – Cognitive loyalty refers to the existence of beliefs that (typically) a
• brand is preferable to others
• – Affective loyalty reflects a favorable attitude or liking based on satisfied
• usage
• – Conative loyalty constitutes the development of behavioral intentions
• characterized by a deeper level of commitment
• – Action loyalty relates to the conversion of intentions to action,
• accompanied by a willingness to overcome impediments to such action