Unit - 1 by Neha Pandya

BMCCMS
Bhagwan Mahavir College of Commerce and

Management Studies
Course : TYBBA SEM 5

Subject : Service Management
Chapter : Introduction to Service Industry
Prepared By : Mrs. Neha Pandya
Prepared by: Mrs Neha Pandya

Syllabus & Reference Books
Detail Content:
Sr. Total
Topic
NO. Hrs.
Introduction to Service Industry
1.1 Introduction to Services

1.1.1 Market size
1.1.2 Recent Investment/ Development BMCCMS
1.1.3 Government Initiative
1.1.4 Road Ahead
1.2 Unique characteristics of Services
1 12
1.3 Types and Classification of Services
1.4 Challenges confronted by Service sector in India
1.5 Factors responsible for growth of Service Economy
1.6 Consumer Behavior in Services
1.6.1 Stages in Consumer Decision Making for services
1.6.2 Factors influencing buying behaviour
1.6.3 Search, Experience and Credence Properties,
Service Marketing Mix
2.1 Product: Core and supplementary Elements, Branding service Products,

2.2 Price: Role of Non-monetary costs, Pricing strategy, Pricing and Revenue
Management, Yield Management,
2.3 Place: Service Distribution, Role of Customers in Service Delivery, delivery
through intermediaries, Franchising, Electronic Channels, Self Service 24
2
Technologies,
2.4 Promotion: Role of Marketing Communication, Marketing Communication
Mix, Integrated Services Marketing Communication,
2.5 People: Employee’s role in Service Delivery, Service Leadership and culture,
2.6 Process: Service Blueprinting, Service Process Redesign,
2.7 Physical Evidence: Servicescape, Service Environments.
Service Quality and Measurement

3 12
3.1 What is Service Quality, The Gaps Model, Service Quality Dimensions
(SERVQUAL)
Handling Customer Complaints and Service Recovery

4.1 Understanding complaining behaviour,
4 12
4.2 Principles of Effective service recovery systems, Service Guarantees,
Discouraging abuse and Opportunistic Customer behavior, Seven types of
customers.

Introduction to different Services
5.1 Introduction, SWOC, Types / Segments, Latest Developments in India, Major
Players, 7Ps of following sectors,
5
5.2 other contemporary issues Retailing, Hospitality - Travelling and Tourism, IT
Enabled Services, Consultancy Services, Transportation Services, Banking
Services, Insurance Services, Healthcare and Hospital Management, Telecom
Sector, Education Sector.
BMCCMS
REFERENCE BOOKS:
1. Services: Marketing, Operations and Management - JauhariDutta, Oxford University Press.

2. Services Marketing - GovindApte, Oxford UniversityPress.
3. Services Marketing: Text and cases - RajendraNargundkar, Tata McgrowHill.
4. Services Marketing: Concept, Planning and Implementation - C Bhattacharjee, Excel Book.
5. Services Sector Management: An Indian Perspective - C Bhattacharjee, Jaico Publishing
House.
6. Services Marketing - Zeithmal, Bitner, Gremler and Pandit, Tata Macgrow-Hill
7. Services Marketing: a south Asian Perspective - Christopher Lovelock, JochenWirtz,
JayantaChatterjee, PearsonEducation.
8. Services Management: Operations, Strategy, Information Technology - Fitzsimmons and
Fitzsimmons, Tata Mcgraw-Hill.

Unit-1 Introduction to Service Industry
Detail Content:
1.1 Introduction to Services

1.1.1. Market size
1.1.2. Recent Investment/ Development
1.1.3. Government Initiative
1.1.4. Road Ahead
1.2 Unique characteristics of Services
1.2.1 Intangibility
1.2.2 Inseparability
1.2.3 Variability
1.2.4 Perishablity
1.2.5 User Participation
1.2.6 Lack of Ownership
1.3 Types and Classification of Services
1.3.1 Types of Services
1.3.2.1 Business Service
1.3.2.2 Social Service
1.3.2.3 Personal Services
1.3.2 Service and their Classification
1.3.2.1 Continuous
1.3.2.2 Intermittent
1.3.2.3 Nature of interaction between customer and organization
1.3.2.4 Customer goes to service organizer
1.3.2.5 Service organizer comes to customer
1.4 Challenges confronted by Service sector in India.
1.4.1 Lack of Skilled Labour
1.4.2 People Dominate
1.4.3 Taxation
1.4.4 Lack of Infrastructure
1.4.5 Market Barrier
1.4.6 Customer Acquisition and Retention
1.4.7 New Technology Adoption and On boarding
1.4.8 Talent Sourcing and Further Retention
1.4.9 Resources Loading and Allocation
1.4.10 Managing Cash Flows
1.5.1 The Lag in Growth in Labour Productivity in Services
1.5.2 The Growth in Intermediate Demand from Firms
1.6 Consumer Behavior in Services
1.6.1 Stages in Consumer Decision Making for services
1.6.1.1 Initiator
1.6.1.2 Influencer
1.6.1.3 Gatekeepers
1.6.1.4 Decider
1.6.1.5 Buyer
1.6.1.6 User
1.6.2 Factors influencing buying behavior.
1.6.1.1 Situational Factors
1.6.1.2 Socio Cultural Factors
1.6.1.3 Psychological Factors
1.6.1.4 Personal Factors
1.6.3 Search, Experience and Credence Properties.
1.6.3.1 Information Search
1.6.3.2 Criteria for Evaluating Quality
1.6.3.3 Evoked Set of Alternatives
1.6.3.4 Innovation Diffusion
1.6.3.5 Perceived Risk
1.6.3.6 Brand Loyalty
1.6.3.7 Attribution of Dissatisfaction
1.6.3.8 Perceived Control

Unit: 1 Introduction to Service Industry
1.1 INTRODUCTION
The services, sector is not only the dominant sector in India’s GDP, but has also attracted
significant foreign investment, has contributed significantly to export and has provided large-
scale employment. India’s services sector covers a wide variety of activities such as trade, hotel
and restaurants, transport, storage and communication, financing, insurance, real estate,
business services, community, social and personal services, and services associated with
construction.
Definition of Service
Services are a special form of product which consists of activities, benefits or satisfactions
offered for sale. These are intangible and do not result in the ownership of anything.
BMCCMS
Services are often contrasted to products. In the most common understanding, a product is
tangible, meaning it can be touched or felt. A service on the other side would be intangible.
However, this distinction is not fully correct. What we should actually compare a service to is
labelled a good. While a good is something that is tangible, a service is not. At the same time, a
service is actually a special form of a product – while a good is another form.
1.1.1 MARKET SIZE
The services sector of India remains the engine of growth for India’s economy and contributed
53% to India’s Gross Value Added at current prices in FY21-22 (as per advance estimates).
India’s services sector GVA increased at a CAGR of 11.43% to Rs. 101.47 trillion (US$
1,439.48 billion) in FY20, from Rs. 68.81 trillion (US$ 1,005.30 billion) in FY16. Between
FY16 and FY20, financial, real estate and professional services augmented at a CAGR of
11.68% (in Rs. terms), while trade, hotels, transport, communication and services related to
broadcasting rose at a CAGR of 10.98% (in Rs. terms). India‘s IT and business services market
is projected to reach US$ 19.93 billion by 2025.
Prepared by:Mrs Neha Pandya

BMCCMS
1.1.2 RECENT INVESTMENTS/ DEVELOPMENTS
Some of the investments/ developments in the services sector in the recent past are as follows:
 The Indian services sector was the largest recipient of FDI inflows worth US$ 94.19 billion
between April 2000-March 2022. The services category ranked 1st in FDI inflow as per data
released by the Department for Promotion of Industry and Internal Trade (DPIIT).
 In April 2022, the Manufacturing Purchasing Managers’ Index (PMI) in India stood at 54.7
from 54 in March 2022.
 India’s service exports stood at US$ 254.4 billion, whereas imports stood at US$ 144.79 billion
in FY 2021-22.
 According to RBI:
 Bank credit stood at Rs. 119.55 trillion (US$ 1.53 trillion), as of 22 April, 2022.
 Credit to non-food industries stood at Rs. 119.12 trillion (US$ 1.52 trillion), as of 22 April,
2022.
 In June 2022, HCL Technologies (HCL), a leading global technology company, announced the
opening of its new 9,000 sq. ft. delivery center in Vancouver, Canada. The new center will
significantly expand its presence in the country to serve clients primarily in the HiTech
industry.
 India’s telephone subscriber base expanded at a CAGR of 2.55% between FY16 and FY21 to
reach 1,166.93 million in FY22.
 IT-BPM industry revenues stood at US$ 227 billion in FY22 with a YoY growth rate of 15.5%.

 In the first-half of 2021, private equity investments in India stood at US$ 11.82 billion, as
compared with US$ 5.43 billion in the same period last year.
 By October 2021, the Health Ministry’s eSanjeevani telemedicine service, crossed 14 million
(1.4 crore) teleconsultations since its launch, enabling patient-to-doctor consultations, from the
confines of their home, and doctor-to-doctor consultations.
 The Indian healthcare industry is expected to shift digitally enabled remote consultations via
teleconsultation. The telemedicine market in India is expected to increase at a CAGR of 31%
from 2020 to 2025.
 In December 2020, the 'IGnITE’ programme was initiated by Siemens, BMZ and MSDE to
encourage high-quality training and technical education. 'IGnITE' aims to develop highly
trained technicians, with an emphasis on getting them ready for the industry and future, based
on the German Dual Vocational Educational Training (DVET) model. By 2024, this
programme aims to upskill ~40,000 employees. BMCCMS
1.1.3 GOVERNMENT INITIATIVES
The Government of India recognises the importance of promoting growth in services sector and
provides several incentives across a wide variety of sectors like health care, tourism, education,
engineering, communications, transportation, information technology, banking, finance and
management among others.
The Government of India has adopted few initiatives in the recent past, some of these are as
follows:
 As of 15 June, 2022, the number of bank accounts opened under the government’s ‘Pradhan
Mantri Jan Dhan Yojana (PMJDY)’ scheme reached 45.72 crore and deposits in Jan Dhan bank
accounts totalled Rs. 1.69 lakh crore (US$ 21.68 billion).
 In October 2021, Prime Minister, Mr. Narendra Modi, approved the establishment of 157 new
medical colleges to boost accessibility of affordable health treatments among citizens.
 In October 2021, the government launched a production linked incentive (PLI) scheme to boost
manufacturing of telecom and networking products in India. The scheme is expected to attract
an investment of ~Rs. 3,345 crore (US$ 446.22 million) over the next four years and generate
additional employment for >40,000 individuals.
 In October 2021, the government launched phase-II of the Mahatma Gandhi National
Fellowship to empower students and boost skill development.
 In October 2021, the PM Ayushman Bharat Health Infrastructure Mission was launched by the
government, to strengthen the critical healthcare network across India in the next four to five
years.
 In September 2021, India and the UK joined the 11th Economic and Financial Dialogue (EFD)
to discuss the FTA (Free Trade Agreement) opportunities in services.

 The Indian government is planning to introduce a credit incentive programme worth Rs. 50,000
crore (US$ 6.8 billion) to boost healthcare infrastructure in the country. The programme will
allow companies to access funds to ramp up hospital capacity or medical supplies with the
government acting as a guarantor.
 In June 2021, India and Australia announced its collaboration in cyber-enabled critical
technologies, highlighting the requirement to boost the critical information security
infrastructure such as 5G telecom networks.
 Under Union Budget 2021-22, the government allocated Rs. 7,000 crore (US$ 963.97 million)
to the BharatNet programme to boost digital connectivity across India.
 FDI limit for insurance companies has been raised from 49% to 74% and 100% for insurance
intermediates.
 On January 15, 2021, the third phase of Pradhan Mantri Kaushal Vikas Yojana (PMKVY) was
launched in 600 districts with 300+ skill courses. Spearheaded by the Ministry of Skill
 Development and Entrepreneurship, the third phase will focus on new-age and COVID-related
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skills. PMKVY 3.0 aims to train eight lakh candidates.
 In January 2021, the Department of Telecom, Government of India, signed an MoU with the
Ministry of Communications, Government of Japan, to strengthen cooperation in the areas of
5G technologies, telecom security and submarine optical fibre cable system.
 In October 2020, the government selected Hughes Communications India to connect 5,000
village panchayats in border and naxal-affected states and island territories with satellite
broadband under BharatNet project by March 2021.
 In the next five years, the Ministry of Electronics and Information Technology is working to
increase the contribution of the digital economy to 20% of GDP. The government is working to
build cloud-based infrastructure for collaborative networks that can be used for the creation of
innovative solutions by AI entrepreneurs and startups.
 On Independence Day 2020, Prime Minister Mr. Narendra Modi announced the National
Digital Health Mission (NDHM) to provide a unique health ID to every Indian and
revolutionise the healthcare industry by making it easily accessible to everyone in the country.
The policy draft is under ‘public consultation’ until September 21, 2020.
 In September 2020, the Government of Tamil Nadu announced a new electronics & hardware
manufacturing policy aligned with the old policy to increase the state's electronics output to
US$ 100 billion by 2025. Under the policy, it aims to meet the requirement for incremental
human resource by upskilling and training >100,000 people by 2024.
 Government of India has launched the National Broadband Mission with an aim to provide
Broadband access to all villages by 2022.
1.1.4 ROAD AHEAD
By 2025, healthcare industry is expected to reach US$ 372 billion. India’s digital economy is
estimated to reach US$ 1 trillion by 2025. By end of 2023, India’s IT and business services
sector is expected to reach US$ 14.3 billion with 8% growth.
The implementation of the Goods and Services Tax (GST) has created a common national
market and reduced the overall tax burden on goods. It is expected to reduce costs in the long
run-on account of availability of GST input credit, which will result in the reduction in prices of
services. India's software service industry is expected to reach US$ 1 trillion by 2030.
Note: Conversion rate used for June 2022 is Rs. 1 = US$ 0.013
References: Media Reports, Press Releases, DPIIT publication, Press Information Bureau
Note: *- Services sector includes Financial, Banking, Insurance, Non-Financial / Business,

Outsourcing, R&D, Courier, Tech Testing and Analysis, Other
Importance of Services for the World Economy
Without doubt, services have grown dramatically in recent years. As the share of services is
growing rapidly in the world economy, one thing is clear: Services are becoming more and
more important. Today, they make up already more than 65% of the gross world product. In
developed countries, the service sector contributes more to economic growth than any other
sector. BMCCMS
However, service is not service, as may the definition of services suggest. That is, service
industries vary greatly. Not only companies do offer services, but also governments and non-
profit organizations. However, all services have certain characteristics in common. Therefore,
let’s now have a look at the unique characteristics of services.
1.2 Characteristics of Services
In the following, we will go into the most relevant characteristics of services. The
characteristics of services that we discuss apply universally to any service. They make services
unique and different from goods.
 Intangibility
Service intangibility means that services cannot be seen, tasted, felt, heard or smelled before
they are bought. You cannot try them, like you would maybe take a car on a test drive first. For
instance, airline passengers have nothing but a ticket and a promise that they will arrive at a
certain time at a certain destination. But there is nothing that can be touched. However,
intangibility does not mean that there is nothing tangible surrounding the actual service
delivery. In many cases, you will see tangible elements that go with the service itself. Tangible
dimensions may include for instance the place (e.g., a barber shop), equipment (e.g., the
scissors), and communication material (e.g., flyers promoting the barbershop). These tangible
dimensions are part of the experience the customer buys. Also, they help to prove the service
quality.
 Inseparability
Inseparability means that services are produced and consumed at the same time. This also
entails that services cannot be separated from their providers. Contrary to services, physical
goods are produced, then stored, later sold, and even later consumed. Services are first sold,
then produced and consumed at exactly the same time.
A product can, after production, be taken away from the producer. However, a service is
produced at or near the point of purchase. For instance, when visiting a restaurant, you order
your meal. But you also order the waiting and delivery of the meal, the service provided by the
waiter, etc. All these elements, including the providers, are part of the service and therefore
inseparable. In services marketing, a service provider is the product.
 Variability
Variability is another key characteristic of services. It refers to the fact that the quality of
services can vary greatly, depending on who provides them and when, where and how. Because
of the labor-intensive nature of services, there is a great deal of difference in the quality of
BMCCMS
service provided by various providers, or even by the same providers at different times.
Let’s consider an example, a big hotel chain. As a renowned hotel chain, it may have a
reputation for providing better service than others. However, the service quality will never be
the same. One employee may be very cheerful and provide front desk services particularly
efficient. Another employee might just have a bad day and be a bit slower and maybe even
unpleasant. But even the quality of services provided by a single hotel employee is not always
the same. For instance, energy levels differ depending on the time of day.
As a service company’s goal is to provide consistent high quality services at all time, service
variability is a challenge. Luckily, it can be managed in several ways. Firstly, employees should
be selected by their ability to provide consistent service quality. Next, they should be trained
carefully and regularly to avoid drops in service quality. In addition, you may consider to
introduce incentives to reward employees for delivering consistent service quality. For instance,
you could ask customers to rate their satisfaction with the service, or implement complaint
systems.
 Perishability
Perishability means that services cannot be stored for later sale or use. In other words, services
cannot be inventoried. This is one of the most significant characteristics of services, since it
may have a major impact on financial results.
Doctors or dentists often charge patients for missed appointments because the service value has
foregone. The value existed only at that particular point and disappeared when the patient did
not come.
When demand is steady, the perishability of services is not a major problem. However, in case
of fluctuating demand, service firms can have difficult times. For this reason, transport
companies own much more equipment than they would if demand were even throughout the
day: the demand during rush-hours needs to be served at that specific time, it cannot be served
later or earlier.
Consequently, service companies use various techniques for creating a better match between
demand and supply. For instance, a key technique is called Demand Shifting. By charging
different prices at different times, demand may be shifted from peak periods to off-peak
periods. Next to off-peak pricing strategies, firms might consider non-peak promotions,
complementary services, and reservation systems to shift demand to non-peak periods. On the
supply side, companies can for instance hire part-time employees to serve peak demand. Of
course, you could also simply expand capacity to serve demand during peak periods, although
there is a limit to that.

 User participation
Consider the last service you used. Maybe it was a restaurant visit where you got great service.
Or you have been watching your favorite TV show on a streaming platform. Whatever it was,
you participated in the service.
User participation is one of the most important characteristics of services, even if it is often
forgotten. Indeed, users participate in every service production. Even when the user is not
required to be at a location where the service is performed, users participate in every service
production. A service cannot be separated from its provider, but neither can it be separated from
its user. This concept is closely related to the other characteristics of services we have discussed
so far.
BMCCMS
 Lack of Ownership
Lack of ownership is another key service characteristic. It refers to the fact that you cannot own
and store a service like you can a product. This characteristic is strongly linked to several other
characteristics of services, such as intangibility, perishability, and inseparability. The lack of
ownership is actually so crucial to understand services that we have mentioned it already.
Remember the definition of services: Services are a special form of product which consists of
activities, benefits or satisfactions offered for sale, which is intangible and does not result in the
ownership of anything.
Due to the lack of ownership, it is required to market services in a different way than goods.
The ownership of goods transfers with the sale, which also provides an opportunity to the buyer
to resell the good. This does not work for services. As a user, you just have access to the
service. And, since, the service is perishable, once used by you, you cannot hand on the
ownership of the service – there is no ownership. For example, you might book a hotel room or
pay for using a swimming pool. However, after you have spend a night in the hotel or swum a
few lanes in the pool, you don’t “own” anything – ownership rests with the providers.
1.3 Types of Services
Business Services
The services used by business organizations to conduct activities are known as business
services. The business services assist the business but do not deliver a tangible commodity. For
example, transportation services do not give a tangible result, but transport goods, inventory,
raw materials, etc., from one place to another. The major business services are insurance,
banking, warehousing, transportation and communication services.
Types of Business Services
Banking
Commercial banks play an essential role in an economy by providing their customers with
institutional credit. These commercial banks transact the banking business, i.e., they accept
money with the motive of lending and investing the deposited money by the public, repay them
on demand, or provide them withdrawing facilities through cheques, drafts, orders, etc. The
banks also earn some profit by lending money to the companies. In simple terms, banking
services provide finance to businesses in any form, for different purposes, such as purchasing
raw materials, building, machines, and their daily routine activities. Besides, the banks also
provide the companies with locker, draft, debit card and credit card facilities.
Insurance
Insurance services involve facilitating the companies with insurance for their business. In
simple terms, insurance companies sign an agreement with companies, charge a premium fee,
and then transfer their risk to themselves. The signed insurance agreement contains a promise
by the insurance company to pay theBMCCMS
mentioned insured company a fixed amount either on the
maturity of the fixed period or in case of an accident or mishap to the business. Different kinds
of insurance are life insurance, marine insurance, fire insurance, health insurance, etc.
Transportation
Transportation refers to the transfer of people, goods, raw materials, etc., from one place to
another. Companies mainly use transport services to transfer finished goods, raw materials,
inventory, human resources, etc., from one place to another. Transportation plays a crucial role
in the development of an organization as these are the only services that transport raw materials,
essential products, and human resources from one place to another. Different modes of
transportation supporting these services are rail, air, sea, road and waterways.
Warehousing
Warehousing means storing goods, materials, etc., in a scientific and systematic manner.
Usually, there is a time gap between the production and utilization of the goods; therefore, an
organization needs to preserve the goods until they are utilized. Warehousing solves this
problem of the companies by providing storage facilities to the companies. Today’s
warehousing services provide the right quantity at the right time and place, in the right physical
form, and at the right cost. Typically, warehousing services are used by importers, wholesalers,
exporters, manufacturers, customs, transport businesses, etc.
Communication
Communication is the process of creating a common understanding amongst people by
exchange of messages through different sources. For the success of a business, it needs to
establish a good relationship or link with the outside world, including customers, creditors,
suppliers, competitors, etc., as it cannot run in isolation. Therefore, it is essential for companies
to use fast, accurate and efficient communication services. Communication services can be used
for placing an order, filing a complaint, providing suggestions, expressing ideas, sharing
information, etc. The main communication services used by companies are telecom and postal.
Social Services
The services provided by an individual or a group of individuals voluntarily for the

accomplishment of some social goals are known as social services. The social goals include
improving the standard of living for the weaker section of society, providing educational and
health facilities to poor children and people, or providing hygienic conditions in slum areas.
The social service providers usually voluntarily provide the services along with some
considerations to cover their costs. Therefore, these service providers do not have a profit
earning motive. For example, educational facilities or services provided by NGOs to poor
children.
Personal Services
The services that give different customers’ a different experience are known as personal
services. These types of services are inconsistent in nature and differ based on the service
provider, customers’ demands, preferences,BMCCMS
etc. For example, restaurants, hotels, tourism, etc.
1.2.1 SERVICES AND THEIR CLASSIFICATION

A lot of attention has been devoted towards the development of a classification system for
services. Such a classification system helps service managers to cross their industry boundaries
and gain experience from other service industries which share common problems and have
similar characteristics.
At the simplest level we can use two dimensions for classification – one the tangibility of
services act and secondly, to whom the services are directed at. Table 1 will help you understand
the classification scheme.
Table 1
Services
Nature of the Directed At
Service Act
Peop Possessi
le on
Tangible Action Services directed at people’s Directed at goods,
bodies physical possession
Transportation,
Health care, Saloons,
Laundry/Dry Cleaning,
Restaurants,
Lawn Care
Transportation
Intangible Action Services directed at people’s Services directed at intangible
minds assets
Education, Broadcasting Banking, Legal Services,
Information, Museum Insurance, Accounting
Source: Loveluck, Christopher, H., “ Service Marketing”, Prentice Hall, Englewood
Cliffs, N.J., 1991.
Table 1 makes us understand the nature of service act. Whereas other classification schemes allow
us to understand relationship between service organisation and it’s customers, the nature of
services demand and the attributes of a service product. For instance, in the case of services and
customer relationship scheme both institutional and individual customers may enter in to a
continuing relationship with service providers and opt for receiving services continuously.
Therefore, it can also be classified on the basis of whether nature of relationship is continuous or
Table 2
Nature of Members Non-Membership
Delivery hip
Continuous Education Police Protecting
Insurance Public Highway
Banking T.V. Transmission
Intermittent Theatre Seat Car Rental
Subscription Pay
Telephones
intermittent. It can be illustrated as in Table 2.
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Whereas on the basis of service delivery mode Love luck has used two service delivery modes, viz.,
single and multiple site modes as is given in Table 3.
Table 3: Service Delivery Mode

Availability of Outlets
Nature of interaction
Single Site Multiple Site
between customer and
organisation
Theatre Bus Service
Customer goes to Fast Food Chain
service organiser
Service organiser Lawn Mart Delivery

comes to customer Care Pest Emergency Auto
Control Repairs
Customer and organiser transact Credit Telephone Company
Cards Local
T.V. Stations Broadcasting

In tourism we can also apply another important basis for classifying services, i.e., extent of
contact that needs to be maintained between the user and provider. The market implication in
this case being the necessity of physical presence of the provider as well as need to manage
desired quality of personnel in case of high contact services. On this basis all services can be
classified on high contact or low contact services depending upon the time a user needs to
spend with the services organisation/provider in order to utilise the services. For example, high-
level contact services are hospitality, tourism education, theatre performance and low contact
services include dry cleaning, telecommunic ation and broadcasting.
1.4 Challenges Faced by Service Sector in India
 Lack of Skilled Labour

BMCCMS
Small and medium enterprises in India are highly labour-intensive. The SMEs cannot provide
enough wages to the workers and adequate working conditions to retain them. Many skilled
workers migrate to other countries where they can find jobs with better wages and working
conditions. This shortage of a skilled labour force makes it difficult for SMEs to run their
business and productivity.
Moreover, due to the lack of skilled labour, MSMEs in India have to hire untrained or unskilled
employees. Hiring these unskilled workers often causes a decrease in the quality of products
produced by MSMEs as they cannot meet international or domestic standards.
It is also noteworthy that SMEs face quite a few problems regarding finance. The complicated
procedure followed by banks and financial institutions makes it difficult for SMEs to obtain
business loans or, for that matter, even personal loans for their employees.
 People Dominant
As mentioned earlier, this Indian service sector depends on human contact and is also people-
centric. The social distancing norms have severely impacted their ability to survive, and the
severe restrictions on movement and the fear of infection further add to the pressure. A large
section of businesses is likely to get permanently shut down, while others may require
substantial government support to survive.
The pandemic has caused massive disruptions across sectors, with many businesses facing
temporary or permanent closure. However, some sectors such as technology platforms, e-
commerce firms, healthcare services, FMCG companies, etc., have witnessed growth in demand
and supply.
 Taxation
The sector suffers from multiple direct and indirect taxes and it makes it one of the most taxed
sectors at present. The contribution of the service sector to the Indian economy has seen
significant growth over the years, with the employment generation focusing on this sector. It
has played a pivotal role in our development endeavours and continues to do so. There is no
allocation of tax holidays or incentives specifically earmarked for this thriving and rapidly
growing service sector segment by either the state governments or central Government.

However, both focus on creating a conducive environment, particularly addressing the financial
challenges MSMEs and SME segments face due to increasing input costs.
 Lack of Infrastructure
The development of infrastructure facilities and services is the responsibility of both the Central
and State Governments. In India, different infrastructure facilities exist under different
departments and agencies such as electricity, urban transport, road transport, railways, water
supply, sewerage and solid waste management, and telecommunications.
The lack of infrastructural facilities leads to higher costs for business organisations, and it
makes them dependent on the Government for support for investment in these facilities. The
Government should provide incentives to the private sector to develop infrastructure projects.
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The availability of infrastructure facilities has always been a big challenge, especially in rural
and semi-urban areas. Most small businesses are located in rural or semi-urban areas where
access to finance is difficult due to the lack of banking and other financial services such as
banking products, insurance products, capital market products, etc. It has further contributed to
their low growth rate over the years.
 Market Barriers
India's trade within the sector of merchandise and services with its Non-WTO Partner countries
has been hampered by several market entry barriers. Several market entry hurdles have impeded
India's commerce with its Non-WTO Partner countries in the product and services sectors.
For instance, even though the US is one of India's most important trade partners, there are
several barriers to entry. These include -
 Licensing of skilled service providers that are usually regulated at the state level in the
US
 The restrictive regime in the case of shipping services in the US with many types of
assistance to the domestic shipping sector, such as a minimum of fifty per cent of
government shipments for the US-registered ships
 society also need to improve their living conditions, but it will not be entirely possible
without the betterment of the service sector.
 Customer Acquisition and Retention
One of the key sources of profit for professional services firms is their customers. With the
ever-increasing competition in constantly changing markets, organizations find it challenging to
acquire new clients and keep existing ones. Customer acquisition and retention challenges in
the professional services industry arise from:
 Increased competition
 Lack of customer loyalty and trust
 Problems related to capturing customers’ attention
 New business models and changing market trends
 Markets crowded with advertising messaging
Ask yourself the following questions: What can be done to make our company more appealing
to customers? What are the challenges faced by organizations in the industry that we can take
advantage of? How can we develop innovative and effective marketing strategies to acquire
new clients? From creating more personalized messaging to identifying customer pain points
and offering relevant solutions, companies can significantly improve their customers’
experience.
At the same time, with so many firms competing for business, it may seem challenging to keep
existing clients. It’s not a secret that customers only return to brands that they had good
experiences with. Improving the quality of your services and increasing your customer
engagement can help keep your customers satisfied and ensure they’ll come back to you. Try
conducting surveys to get your customers’ feedback or send engaging emails providing your
users with valuable information.
 New Technology Adoption and On boarding BMCCMS
In the digital transformation era, every organization needs to apply new technologies to stay
ahead of the competition. The difficulty of adapting to new technology and keeping up with the
trends is among the key challenges organizations face.
Complex and time-consuming technology adoption processes followed by staff training can be
exhausting for organizations and their employees. Besides, there are technological changes and
operational updates to be made within the company’s existing IT environment. The first step
that professional services organizations should take on the way to successful technology
adoption is to assess and identify the current system gaps. To conquer the technology
challenges faced by the service sector, you need to:
 Understand your technology needs.
Keep an eye on trends in the industry, including new technologies that may influence your
services and employees.
Evaluate your team’s capabilities, skills, and priorities.
Explore tools that can help you access and use new technologies effectively.
Compare available technology options and their impact on your business to select the right
software for your professional services company.
 Talent-Sourcing and Further Retention
Talent sourcing is also part of the challenges faced by the professional services sector. A
constant challenge for HR departments is to find qualified candidates and retain confident,
reliable employees. The grueling talent-sourcing and inadequacy of the requisite expertise can
slow down processes and threaten the balance of your workforce. With so many firms looking
for employees, recruitment processes can become chaotic and highly competitive. So,
understand what potential candidates look for in their potential employers and devise custom
strategies to attract the right talent to your firm.
 To retain top talent:
Since markets change constantly, remember to keep your workforce abreast of the latest
industry developments. Continue investing in employee development and personal growth
opportunities while factoring in the latest developments in the market.

 Offer competitive pay packages.
 Create a career development plan for employees.
 Listen to your people and make sure they have a voice in the organization.
 Adopt a careful new candidates’ selection process.
 Set up special mentoring programs for junior staff.
 Use technology to create engaging training programs and enable efficient collaboration
between the teams.
 Resource Loading and Allocation
Resource management issues can hamper your business growth and are considered one of the
biggest challenges faced by SMBs and large organizations.BMCCMS
Finding the right employees to fill
all your time slots is challenging. Not knowing how many hours each person has available can
overload one person with tasks while another is not busy enough.
Another challenge facing professional services companies today is the lack of proper
understanding of the available resources, their skills, and how to allocate them equally to keep
everyone engaged and on pace with the projects.
To resolve resource loading and allocation issues and find the right people for the right work,
you should:
 Understand and get a handle on your business requirements.
 Ensure all resources are available for your system-wide or project-specific requirements.
 Each member in the organization must understand their job description and specific
roles in the company well.
 Evaluate your employees’ skills and knowledge.
 Use technology to track your staff’s workload and reallocate your resources when it’s
needed.
 Remote and Hybrid Team Management
 Remote and hybrid team management is one of the critical questions that has been
raised in the business over the past few years. COVID-19 has been one of the significant
challenges facing professional services companies today, forcing organizations to
require hybrid and remote teams.
Keeping your employees’ efficiency, productivity, and collaboration at the same levels can be
challenging without enough resources and training. Hybrid and remote teams can benefit
companies looking to scale their workforce and business globally while also competing with
organizations operating remotely. To achieve your remote and hybrid team management goals,
be clear about your expectations. Leverage technologies to keep your teams connected and
make sure they all are on the same page throughout the entire project development process.
 Managing Cash Flows
Cash flow management is one of the major challenges facing professional services businesses
today. Luckily, a solution already exists. In case you are oblivious to our Birdview financials
management module, automated billing and invoicing is an indispensable tool for any company.
Neglecting either one will seriously impact the company’s cash flow velocity.
An effective cash management strategy will help the organization negotiate better terms in its
long-term contracts, save on working capital requirements, and reduce late fees. Billing
seasonality can make cash flows challenging to predict. To manage cash flows effectively:
 Review your billing and invoicing schedule for accuracy and make adjustments as
needed.
 Create a workflow to verify, classify, approve or reject invoices quickly.
 Ensure that the accounts department is equipped to handle large volumes of invoice
data.
 Create a cash pooling system based on specific criteria so that all payments are made for
all invoices at the same time.
 Leverage technology to automate most of your billing and invoicing processes to
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eliminate the risk of human error and payment delays.
 Complete and accurate invoice reconciliation makes cash management a cinch.
Establish how long it takes to collect from each client and factor that into your payment
terms and conditions.
Whether you want to be aware of challenges faced by professional services companies before
you start a business or want to maintain a successful business, the highlighted points will be of
great help to you.
The major contribution to GDP in India comes from the service sector which has grown largely
since liberalisation. The major factors responsible for the high growth of the service sector are
as follows:
(i) High Income Elasticity of Demand: It has been noticed that income elasticity of demand for
services is more than one. Hence, the demand for services increases at a faster rate than demand
for commodities, with the increase in income.
(ii) Technical and Structural Changes: The technical and structural changes in the economy
have made it an attractive destination for outsourcing, thus contributing towards the growth of
service sector.
(iii) Information Technology Revolution: With the advent of the information technology
revolution, it has become possible to deliver services over a long distance at a reasonable cost.
Thus, trading in services has increased worldwide, also benefitting India.
(iv) Economic Reforms In 1991: Economic reforms initiated in 1991, increased demand for
manufacturing industry, thereby benefitting the service sector also. Liberalisation of financial
sector boosted the growth of financial services. Reforms in certain segments of infrastructure
also contributed to the growth of services.
 The Lag in Growth in Labour Productivity in Services:
Part of the explanation for the growth of services is attributed to the slower growth of labour

productivity, as measured by volume of output per employee, that is, the amount of labour
required to produce a given volume of output in other sectors of the economy like
manufacturing, fell more rapidly than in services. Lower output per man in services was the
major explanation for the shift in employment into the service sector.
A number of reasons why this was so, included:
(a) A greater decline in hours worked per man in service than in industry.
(b) A more rapid increase in the quality of labour in industry than in service.
(c) A difference in the physical capital per worker available in industry compared with service.
(d) More rapid technological change in industry than in service; and that industry benefited
more from scale economies.
 The Growth in Intermediate Demand from Firms:
Another part of the explanation for the growth of services is attributed to the growth of
intermediate demand from firms (i.e. providing inputs to manufacturing and other sectors of the
economy). Specialist firms have been set up to provide services previously carried out by
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existing firms (e.g. engineering services, personal services). Alternatively specialist firms have
been set up to provide new services (e.g. data processing).
Business buyers have always used an array of services like accounting, construction, banking,
insurance, legal, research, advertising, public relations, training, transport, and shipping and
consultancy services. As advanced economies have developed so too have markets for service
provision.
Companies and other organizations increasingly rely on the services of specialists because of
the complexity of economic organization and to obtain the economies involved in the division
of labour: technological and competitive pressures require the use of services to keep up-to-date
in a constantly changing environment; organizations are able to retain their flexibility by hiring
in services which provide ‘use’ without ‘ownership’; time pressures and lack of available
internal resources encourage organizations to use outside services rather than having services
provided internally.

1.6 Consumer Behaviour In Services
All of us buy different services for various reasons. One person may prefer to go to a restaurant
for good food while the other may opt for an exclusive restaurant, for status. One person may
prefer to read ‘The Times of India’ early in the morning, while the BMCCMS
other may prefer to read the
same newspaper after coming back from the office. There are women who don’t go to beauty
parlors at all, whereas there are others who go regularly. Similarly, there are many such
examples telling us that people show different behavior in buying and using different products
and services.
The discipline of marketing which helps in developing a deeper insight in these behavioral
differences is called “Buyer Behaviour”. We have developed an appreciation that the meaning
of marketing orientation is that a firm should aim all its efforts at satisfying its customers. And
to keep customers satisfied it becomes essential to have a deeper knowledge regarding the
behavior of the buyer.
 DECISION MAKING ROLES
It is being said, that for the purchase decision some other people might also be involved and
they may have different roles to play. But generally, and more often for services, both
individual or organizational, these roles are played by more than one person. For a marketing
person, it is important to know who plays what role in the purchase decision, so as to adapt the
service format and promotional efforts to these key players.
Conceptually, the consumer decision making roles are best exhibited by the following example.
At a confectionery shop visited by a family to buy bread, a child asks his parents for a candy.
The child becomes the ‘initiator’. The mother suggests that only one piece may be purchased of
‘X’ brand, she plays the role of ‘influencer’. The father orders for one piece of ‘X’ brand and
pays for it, playing the role of ‘decider’ and ‘buyer’. Finally, the candy is eaten away by the
child, which means that he plays the role of ‘user’.
In the purchase of any particular service six distinct roles are played. These are:
• Initiator: The person who has a specific need and proposes to buy a particular service.
• Influencer: The person or the group of people who the decision maker refers to or who
advise. These could be reference groups, both primary and secondary. It could be even
secondary reference group like word of mouth or media, which can influence the
decision maker.
• Gatekeepers: The person or organization or promotional material which act as a filter

on the range of services which enter the decision choice set.
• Decider: The person who makes the buying decision, irrespective of whether he
executes the purchase himself or not. He may instruct others to execute. It has been
observed at times, more typically in house hold or family or individual related services,
one member of the family may dominate in the purchase decision.
• Buyer: The person who makes the actual purchase or makes bookings for a service like
travel, hotel room, hospital, diagnostic lab, etc.
• User: The person who actually uses or consumes the product. It can be other than the
buyer. In a number of services, it has been observed that users are also the influencers.
The number of persons who play these six distinct roles is not fixed. At times more than one
persons are involved (as we have seen in the above example) and at times only one person plays
all the six roles. For example, while buying household grocery items a housewife plays all the
roles and makes the purchases. In organizational buying the dynamics of these six roles
becomes much different and while selling to an organization dueBMCCMS care should be taken in
identifying who is playing what role.
1.6.1 CONSUMER DECISION MAKING PROCESS AND STAGES
The consumer’s decision to purchase or reject a product or service is the moment of final truth
for the marketer. It signifies whether the marketing strategy has been wise, insightful, and
effective, or whether it was poorly planned and missed the mark. Marketers are therefore
interested in the consumer decision-making process by which a consumer selects one
alternative amongst the lot available. The decision not to buy is also an alternative.
A simple consumer decision-making model, as shown in Figure 4.1, ties together the
psychological, social and cultural concepts into an easily understood framework. The decision
model has three distinct components input , process , and output.
Input component of the model include firm’s marketing efforts (marketing mix activities) which
communicate the benefits of the products and services to potential consumers and the non-
marketing socio-cultural influences. Socio- cultural influences include family, friends, social
class, subculture and culture. The combined effect of firm’s marketing efforts, influence of
family and friends, culture etc. affect what consumers purchase and how they use them. The
process components deals with the consumer decision making which involves need
recognization , prepurchase search and evaluation of alternatives.
Figure 1: Input, Process, Output Model of Consumer Behaviour

The decision making is affected by the psychological field i.e. the internal influences. These
influences include motivation, perception, learning, personality and attitudes. The output
portion of consumer decision making model includes two associated activities i.e. purchase
behaviour and post purchase evaluation.
A more comprehensive purchase model was suggested by Fisk 3, who divided the purchase
behavior into three distinct stages viz. Pre-consumption Phase, Consumption Phase (Service
Encounter) and Post-consumption Phase.
The first stage called the pre-purchase stage includes activities which take place before the
actual purchase decision. These activities are typically called, problem/need recognition,
information search on various alternatives and evaluation of alternatives to select the best of
them. At this stage, the individual recognizes a need or problem whose solution usually
involves a potential purchase. He searches for information from various sources-both internal
and external and arrives at a set of possible solutions – ‘The evoked set’.
The second stage is called the consumption stage. This arises if outcome of the prepurchase
stage is a decision to buy a certain brand of service. In this stage the expectations of the pre-
consumption stage are compared with the actual service delivery. This stage is therefore called
the service encounter stage.
Finally, the post-purchase stage, which results in a decision whether to purchase the same
service again or not.
Figure 2: The Three-stage model of consumer behavior
The reasons why people buy or the motives of buying can be put into three categories,
namely: buyers goals, wants and beliefs. As far as general intentions are concerned, people
prefer to be in good or positive conditions and not otherwise. They prefer to be rich and not
poor, entertained and not bored,
clean and not dirty, healthy and not sick, fed and not starved etc. A more acceptable and
positive condition gives rise to a vision which the consumer tracks in the pattern of
purchase for a better life.

This positive and preferred vision in pursuit of better life is also called as the set of goals
to which a buyer strives. These set of goals, perhaps, cannot be achieved simultaneously
and therefore priorities are being set to attain these goals. The other aspect of these goals
is that they also keep on changing as the time passes, hence leaving a scope for the firm
to influence the goals of a buyer.
On the other hand, wants emerge from the buyer’s goals. To want a particular product or
service is nothing but to have a preference and desire to use it or possess it. For the
purpose of convenience, wants are classified into two; standing wants and a current wants.
Standing wants are those wants which are related to permanent goals and the current wants
are those reflecting our existing circumstances.
At this stage a clarification may be noted that the needs are common to all but wants are
socially and culturally oriented. For example, all of us have the basic need for food when
we are hungry while the choice of a restaurant will be made by different people,
differently, keeping in view a set of variables, like type of food, quality of food, price,
atmosphere, etc.
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1.6.2 FACTORS INFLUENCING BUYER BEHAVIOUR
There are a number of factors or variables which affect the buying behaviour. For example;
people go on holiday during the vacation time so vacations become a variable. Similarly, a
person may not buy any of the saving schemes till he comes in the tax bracket, so “tax
payer” becomes a variable. A person may visit an exclusive restaurant during ‘happy hours’,
which he does not visit normally. In this case the marketing efforts of the organization (sales
person and the scheme) becomes the factor influencing to buy. Similarly, there are other
factors which affect the buying decision. These factors can be classified into four major
categories, namely: situational factors, buyer’s socio-cultural factors, personal factors and
psychological factors.
 Situational Factors
The situational factors influencing the buying behaviour are, the influence of time pressure in
product and brand choice, the atmosphere of the retail outlet, occasion of purchase etc. For
example, if you are traveling, then demand for lodging and boarding will obviously be there.
 Socio Cultural Factors
Buyers or consumers do not take buying decision or the decision not to buy, in a vacuum.
Rather, they are strongly influenced by Socio Cultural factors.
a) Cultural Factors: Children acquire from their environment a set of beliefs
values, and customs which constitute culture. These beliefs, values and customs go
deeper and deeper as a person grows. Therefore, it is sometimes said that culture is
learnt as a part of social experience.
The various sub-categories within a culture can be identified based on religion, age, gender,
occupation, social class, geographical location etc. This classification is significantly relevant
from the consumer behaviour point of view. To elaborate, let us come back to our earlier
example of people buying hospitality and tourism services. It has been observed that people
from Gujarat go out on vacations more often. Eating out is a very common phenomenon in
the north of India.
b) Reference Groups: There are certain groups to which people look to guide
their behaviour. These reference groups may guide the choice of a product but may
not be the brand. Peer groups and the peer pressure has generally been observed to
play an important role in the purchase of credit cards, cell phones, etc.
The knowledge of reference group behaviour helps in not only offering substitutes but also in
pricing and positioning them. It is important to note that there are ‘negative’ reference groups
also and some persons don’t want to associate themselves with these groups. The negative
reference groups guide the behaviour in terms of “what not to do”.
c) Family: The family is another major influence on the consumer behaviour.

The family consumption behaviour to a large extent depends on the family life cycle.
The stages in family life cycle include bachelorhood, newly married, parenthood with
growing or grown up children, post-parenthood and dissolution. Knowledge of these
stages helps greatly in knowing the buying process. Often family members play a
significant role in the purchase of a particular service, for example it’s the teenage
children who influence the parents to decide on a destination and middle aged buy
more of insurance services than the younger ones.
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 Psychological Factors
a) Perceptions: It is the process by which buyers select, organize and interpret
information into a meaningful impression in their mind. Perception is also selective in
which only a small part is perceived out of the total what is perceptible. Buyer’s
perception of a particular product greatly influences the buying behaviour. For
example, if the buyer’s perception of a product is not positive it requires much
harder efforts from the marketing or sales person to convince the buyer on the
qualities of the product and thus suggesting him to purchase it.
b) Attitude: An attitude is a learned predisposition to respond in a consistently

favourable or unfavorable manner with respect to a market offer ( i.e. a brand, a
particular shop or retail outlet, an advertisement, etc.). Attitude is a dispositional term
indicating that attitudes manifest themselves in behaviour only under certain
conditions. Knowing a buyer’s attitude towards a product without knowing the
personal goals is not likely to give a clear prediction of his behavior. For example,
someone may have a highly favourable attitude towards car insurance but stays
away from buying it since he has no use for it, as he doesn’t own a car.
Motivation: Motivation is the driving force within individuals that compel them to action.
This driving force is subconscious and the outcome of certain unfulfilled need. Needs are
basically of two types. First, the ‘innate needs’ those needs an individual is born with and are
mainly physiological. They include all the factors required to sustain physical life e.g., food,
water, shelter, clothing, etc. Secondly, the ‘acquired needs’ those which a person acquires as
he/she grows and these needs are mainly psychological, like love, fear, esteem, acceptance
etc.

For any given need, there could be a variety of goals. The specific goal selected is dependent
on the experiences, cultural norms and values, (apart from other characteristics) of the
individual. Failure to achieve a goal generate two types of responses. First, called the
defense mechanism, which includes withdrawal, rationalization etc. and second is called
search for substitute.
 Personal Factors
Personality: Personality can be described as the psychological characteristics that determine
how an individual will react to his or her environment. There are a number of dimensions
(personality traits) against which an appreciation of an individual’s personality can be
developed. Each personality trait denotes two absolute points and a person’s personality
characteristics can be identified somewhere between those two absolute points, indicating
the proximity to either of the two. Some of the traits are as follows:
Personality Trait Behavioural Dimensions

Rigidity Rigid—————–––––––– Flexible
Leadership Leader————————– Follower
Neuroticism Stable————————–– Neurotic
Extroversion Extrovert———————– Introvert
Dependability Independent——————– Dependent
Achievement High achiever—————–
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Low achiever
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Let us examine how buyer behaviour is affected by the personality of an individual and for
this we take the example of extroversion. Extrovert is a person who is more sociable, likes
meeting people, making more friends, prefers to move about, careful about his appearances
and doesn’t like reading books or confining to the four walls of a room. On the other hand
an Introvert is a person who prefers to be left alone, would like to read books rather than
making friends, shies away from social gatherings. There are a number of products which are
preferred more by extroverts rather than introverts. Perhaps the products suggesting status are
purchased more by the extroverts than the others.
Life Style: Lifestyle as distinct from social class or personality is nothing but a person’s
pattern of living and is generally expressed in his/her activities, interests and opinions.
Some of the dimensions of life style are as follows:
Activities Interests Opinions

Work Family Themselves
Hobbies Home Special issues
Entertainment Job Products
Shopping Fashion Future
Media
Achievements
Life styles suggests differences in the way people opt to spend on different products differently.
Life style variables (psychographics variables) help a firm to identify the ‘Inner consumer’ or
the feelings of the consumer about their products which needs to be stressed in advertising
campaigns.
Demographic Factors: Buyer’s demographic factors like age, gender, education, occupation,
etc. also have influence on the purchase behaviour. These factors are very much significant in
the study of behaviour of buyers. For example, fast food outlets are more patronized by the
teenagers than the elderly persons- example of age as a factor; air travel is more used by
the executives than the factory workers-examples of occupation as a factor.
In sum, knowledge of all such dimensions of the buyer will help you in understanding his
needs and wants and also help you in integrating all those elements in your product offer
which the consumer wants.
1.6.3 SEARCH, EXPERIENCE, AND CREDENCE QUALITIES

One of the most significant differences between goods and services is that in goods “Search
Qualities” dominate while services are dominated by “Experience and Credence Qualities”.
Figure 4.3: Continuum of evaluation for different types of products
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Search qualities are those attributes of a product which the consumer can determine before
the purchase. This is more common in physical goods. For example colour, style, fit, feel,
smell etc.
The second is the experience qualities, which are the attributes which can only be
determined after the purchase, or during the process of consumption. The third, is the
credence qualities i.e. characteristics which the consumer can not evaluate even after the
consumption, like auto repair or medial diagnosis. For example, it may be difficult for a
patient to assess whether or not a hospital provided appropriate services. Such characteristics
exist invariably in services. In nutshell, most goods are high in search qualities and most
services are high in experience or credence qualities. Figure 4.3 gives a continuum of
evaluation for different types of products based on search, experience and credence qualities.
As services are rich in experience and credence qualities, the following important aspects
related to consumer decisions making process need to be understood.
□
Information Search: In the case of services, consumers rely more on personal
sources of information for pre purchase evaluation. Also they indulge in more
post purchase evaluation than pre purchase evaluation and as a result the amount
of post purchase evaluation done in services is much higher that in case of
goods. Some of the reasons for this are:
i. Mass communication conveys very little about experience qualities.
ii. Most of the service providers are local/independent and therefore lack
the financial or marketing acumen to promote their offering.
iii. Shared advertising is rare as the producer and retailer are the same in
services.
iv. Very few attributes of services could be discovered prior to purchase.
□
Criteria for Evaluating Quality: Consumers normally tend to evaluate the
quality of a service offering through its price and physical facilities provided by
the service provider. Higher the price better is the quality perceived. Same holds
good for physical facilities. This is especially true when other cues for evaluating
quality are not available.
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□
Evoked Set of Alternatives: In services the customers’ “evoked set of offering”
is small. This is due to the following:
i) Differences in retailing: In services the offerings of the competitors are
rarely exhibited unlike in case of goods. Also it is highly uncommon to find
more than one provider of a service in a given area.
ii) The consideration set is small as very little information is available prior
to purchase.
In case of Non-professional services the evoked set includes self provision of
services. e.g. housekeeping, laundry etc.
□
Innovation Diffusion: Consumer adoption of innovations is much slower in case
of services than in products. This is because consumers have to find a distinct
benefit in the offering of the competitor to shift to that. Complexity of services
makes it difficult to evaluate the ability of the provider and indivisibility does not
allow trying the service before consumption.
□
Perceived Risk: Consumers associate greater risk with buying services than
with goods. This is on account of intangibility of services which makes it difficult
to get information about the offering. Most services are not standardized even if
they are provided by the same provider because a lot depends on the person’s
caliber and ability to customize it based on the need of the consumer. Another
important reason is that unlike in goods most services do not come with
guarantees/warranties.
□
Brand Loyalty: Brand switching is lesser with services as compared to
services. This is due to the following factors:
i) Greater search and monetary cost associated with moving to another
service provider.
ii) Fewer substitutes are available for services.
iii) The rapport that a consumer creates with a service provider prevents him
from moving to a new provider as there is always a possibility that the new
provider may not understand his needs as well as the previous one did.
□
Attribution of Dissatisfaction: The provision of the service is based on the
requirements stated by the consumer. As such he holds himself partly

responsible if the service provided is not up to his requirements and hence

complains less frequently.
□
Perceived Control: The model proposed by Bateson emphasizes that consumers
evaluate services control; they areBMCCMS
able to exercise in a given situation.
Perceived control theory is based on the premise that customers feel more
satisfied with a service if they believe that they have greater control over the
service delivery. This notion is useful when designing new services Similarly, if
the employees also think the same way, satisfaction drawn from the job is higher.
However, they two may not co-exist.
□
Simultaneously, therefore, it is important for the organization to balance out
between the two, by developing adequate service standards, communicating the
same to the consumers, to deliver the services adhering to those standards and
developing systems for operational efficiency, expenses and revenue flow.
Question Bank
 Answer the following (2 marks each)
1. Define service with examples.
2. What do you mean by inseparability and perishability in service sector?
3. What is continuous and intermittent nature of service?
4. What is Customer and organiser transact explain with examples.
5. What is Talent-Sourcing and Further Retention explain with examples.
6. Explain Socio Cultural Factors with examples.
7. Explain social service with examples.

1. Explain the types of services with suitable examples.
2. Explain the characteristics of services management.
3. What are the Factors which are responsible for the growth of Service in India Economy?
4. Explain the Stages of Consumer Decision Making in service sector.

1. Explain in detail about Services and their Classification with suitable examples.
2. What are the Challenges confronted by Service sector in India?
3. What are the Factors influencing buying behavior of customer in service industry?
4. Explain Search, Experience, and Credence Qualities with respect to service sector.

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BMCCMS

Bhagwan Mahavir College of Commerce and

Course : TYBBA SEM 5

Prepared by: Mrs Neha Pandya

1.1 Introduction to Services

Service Marketing Mix

2.1 Product: Core and supplementary Elements, Branding service Products,

Service Quality and Measurement

Handling Customer Complaints and Service Recovery

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1. Services: Marketing, Operations and Management - JauhariDutta, Oxford University Press.

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1.1 Introduction to Services

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1.1.1 MARKET SIZE

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1.1.2 RECENT INVESTMENTS/ DEVELOPMENTS

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1.1.3 GOVERNMENT INITIATIVES

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1.1.4 ROAD AHEAD

Note: *- Services sector includes Financial, Banking, Insurance, Non-Financial / Business,

Importance of Services for the World Economy

1.2 Characteristics of Services

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1.3 Types of Services

banking, warehousing, transportation and communication services.

Types of Business Services

The services provided by an individual or a group of individuals voluntarily for the

1.2.1 SERVICES AND THEIR CLASSIFICATION

Table 3: Service Delivery Mode

Service organiser Lawn Mart Delivery

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1.4 Challenges Faced by Service Sector in India

 Lack of Skilled Labour

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 Customer Acquisition and Retention

 New Technology Adoption and On boarding BMCCMS

 Understand your technology needs.

 Talent-Sourcing and Further Retention

 To retain top talent:

opportunities while factoring in the latest developments in the market.

 Resource Loading and Allocation

 Understand and get a handle on your business requirements.

 Managing Cash Flows

1.5 Factors responsible for growth of Service Economy

 The Lag in Growth in Labour Productivity in Services:

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 The Growth in Intermediate Demand from Firms:

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1.6 Consumer Behaviour In Services

 DECISION MAKING ROLES

• Gatekeepers: The person or organization or promotional material which act as a filter

1.6.1 CONSUMER DECISION MAKING PROCESS AND STAGES

Figure 1: Input, Process, Output Model of Consumer Behaviour

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Figure 2: The Three-stage model of consumer behavior

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c) Family: The family is another major influence on the consumer behaviour.

b) Attitude: An attitude is a learned predisposition to respond in a consistently

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Personality Trait Behavioural Dimensions

Activities Interests Opinions