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LESSON 3: CLASSIFICATION OF SERVICES
The Objective of this Lesson is to have an insight into
• Classification of services • Development of service marketing • Examples of service sectors • Importance of service sectors • Factors contributing to growth • Challenges faced by service sectors • Difference between goods and services.
Profit Orientation The overall business orientation is a recognized means of classification:
• Not-for-profit: The Scouts Association, charities, public
sector leisure facilities.
• Commercial: banks, airlines, tour operators, hotel and
The Development of Services Marketing
Firms which produce and manufacture physical goods were involved in market-ing long before service providers embraced marketing and developed specific marketing activities. Many of the developments in services marketing are fairly recent. There are a number of factors affecting developments within services marketing: Organisation size and structure Regulatory bodies Growth in service industries Characteristics of services Customer/employee interaction Service quality Specific service sectors Organisation Size and Structure Many service providers are typically small and specialized plumbers, lawyers and accountants are representative of the traditional service provider. In the past, they catered exclusively for the existing local demand. Marketing specialists were not employed due to the size of the operations, which may have been sole trader or partnership based, and due to limited competition, especially on a local scale. Regulatory Bodies Regulatory bodies have also restricted the activities of many service providers. Restrictions still exist today on the amount and type of advertising which can be undertaken by certain professional services, particularly in the medical and legal fields (although these have been relaxed in the UK and the USA). Public sector services and charities are also frequently constrained in their ‘business’ activities by various forms of legislation and regulations. Growth in Service Industries However, growth in major services industries such as banking, hotel and catering and tourism services has been accompanied by new developments in marketing. Services marketing ideas and techniques have grown alongside the growth of the service economy. Marketing has contributed to the growth and success of service industries in a number of ways. The design of the service product, or offering, has shifted from a product-based focus to a customer focus - the organisation provides what the
Classification of Services
As has already been suggested, there are a number of ways of classifying service activity, and there is inevitably some degree of overlap between the methods available. This section outlines some of the methods of classification commonly used. End-user Services can be classified into the following categories:
• Consumer: leisure, hairdressing, personal finance, package
• Business to business: advertising agencies, printing,
accountancy, consultancy. .
• Industrial: plant maintenance and repair, work wear and
hygiene, installation, project management. Service Tangibility The degree of tangibility of a service can be used to classify services:
• Highly tangible: car rental, vending machines,
• Service linked to tangible goods: domestic appliance repair,
• Highly intangible: psychotherapy, consultancy, legal services.
People-based Services Services can be broken down into labour-intensive (peoplebased) and equipment-based services. This can also be represented by the degree of contact:
• People-based services - high contact: education, dental care,
restaurants, medical services.
• .Equipment-based -low contact automatic car wash,
launderette, vending machine, cinema. Expertise The expertise and skills of the service provider can be broken down into the following categories:
• Professional: medical services, legal services, accountancy,
• Non-professional: babysitting, care taking, casual labour.
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It is not only consumer services which have been revolutionized by new technology. Information technology. Characteristics of Services The characteristics of services “‘intangibility. and the service provider must. Franchising is also undertaken. even if the customer is located overseas. heterogeneity and Perishability . as evidenced by the worldwide growth of McDonalds fast food restaurants. Production and consumption are inseparable. with the service provider forming a partnership with an organisation in the target country to develop business. London is still one of the major bases for financial services including commodities brokerage and insurance. especially not-for -profit organisations and professional services. insurance and investment but now cover a far wider range services. as when a firm of consulting engineers sends a. Service organisations are not only involved in the business of exporting. therefore. MARKETING OF SERVICES International Services Marketing The UK economy depends on invisible exports for a substantial proportion of revenue. ‘Color Me Technological Developments in Services Marketing Perhaps the biggest impact of new technology in services marketing is the move away from traditionally people-based service to a higher degree of automation. Many restaurants and fast food outlets use computerized till systems.the banks’ hole-in-the-wall cash dispensers . with ‘on board computers’. The adoption of marketing by these organisations. Technological advances in home equipment has led to a demand for new services. is leading to a greater marketing orientation. Exporting is considered to be a higher risk venture for service organisations than for firms producing physical products. it can be seen that new technology increases the demand for services overall. The development of a clearer understanding of perceived service quality and the customer’s perception of quality based on the total service experience has addressed specific quality issues in services marketing. Consequently.marlset needs! not what the organisation thinks the market wants. It is not possible to export a batch of the ‘product’ to be sold through distributors or agents as it is with physical goods. establish a base in the target export market. member of staff to another country to carry out contract design work. The widespread ownership pf VCRs (video cassette recorders) has led to flourishing video film rental businesses. and the growth or marketing expertise in the area. is relatively high. computerized self-serve ticket reservation machines. Customer/employee Interaction The customer/employee interaction takes on a far more significant role in services marketing than in the marketing of physical goods. These differences led to the development of the expanded marketing mix to focus on issues perceived by customers to be important in services marketing. McDonalds use a combination of franchising and setting up wholly owned subsidiaries on various locations. opening up new areas of business for installation contractors. where the order is keyed in to the till. even remote banking services where all transactions are done by telephone are all gaining wide acceptance amongst consumers. which. Relatively new concepts have emerged to support services marketing such as internal marketing and relationship’ marketing. Specific Service Sectors Specific areas of services marketing have attractedihterest. Libraries and universities can utilize computer databases from anywhere in the world via computer modem links. Marketers in these organisations are faced with ethical considerations and other constraints. The main reason for this is that services tend to be far more people based. Remote diag-nostics using the telephone modem facility allow computer service technicians to carry out software adjustments and upgrades from base. In fact. Agents who act as employees of the service provider can be appointed in export markets. Joint ventures may be undertaken. Service Quality Services marketing also places a clear focus on service quality and programmes for implementing service quality. Even one-to-one training programmes can now be delivered via interactive video technology. or even a hand-held key pad. with trained service personnel. Automated teller machines . Advertising agencies are an example of a service industry becom-ing internationalized in response to changes in the world market situation. need greater technical expertise for maintenance. services marketing attaches more emphasis to training and better communica-tions. Technological developments have also had an impact on the services market-ing management task. In general. Many new technological developments have been developed specifically around services as discussed previously. Today’s motor cars. Industrial services are also utilizing new technology. such as cash dispensers. but are increasingly becoming international. This creates opportunities for marketers in service organisations. Certain public sector services are similarly constrained. Direct export is possible. Invisible exports have traditionally included shipping. in turn. This means that the level of initial investment. Automatic car washes. most marketing-linked technological developments have a role to play in ser-vices marketing management. Cable TV network and satellite TV receivers are growing in popularity.313 © Copy Right: Rai University 13 .mean that there are new considerations facing services marketers. Market entry methods closely mirror those for international marketing of goods. even for a very small overseas operation. City financial services and expertise are invisible exports when the customer is from outside the UK. and relayed directly to the kitchen while the bill is being produced. 11. leads to greater demand for training. These are now finding increas-ing acceptance in mainstream marketing and are being applied to areas outside service. electronic funds transfer and the use of databases have revolutionized services marketing management.are a familiar sight on high streets everywhere. inseparability.
a personal image consultancy service. One of the main difficulties associated with international services marketing is the question of cultural differences. Service delivery may have to be adapted.Beautiful’. has consultants in many countries. Cultural differences take on far greater significance in the highcontact service encounter situation. MARKETING OF SERVICES 14 © Copy Right: Rai University 11. and perceived service quality criteria examined from the perspective of the target customers in different markets.313 .
Tutorials • Discuss examples of service sectors. bookstores. • Explain the factors contributing to the growth of service MARKETING OF SERVICES sectors • Challenges faced by Service sector are many. day care. Auto repair.313 © Copy Right: Rai University 15 . Restaurants. Notes Good-Service Continuum ~Pure Goods w/ Goods Services Physical Product w/ product service 50/50 Equal mix Services ~Pure w/ Goods Services Knowledge based Immediate consumption Gasoline. Discuss. steel. consulting. groceries. Medical care. 11. theater. computers. software. Rental movie movies.
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