TYBMS SEMESTER 5: SERVICE SECTOR MANAGEMENT PART 1: SSM THEOREY AND CONCEPT BUILDING

CHAPTER 1:
INTRODUCTION TO SERVICE SECTOR MANAGEMENT

SERVICES- DEFINED
 An act or a performance  Can be offered from one party to another  Intangible  Does not result in the ownership of anything  Its production may or may not be tied down to the physical product

SERVICE V/S CUSTOMER SERVICE:
 Service= Major service  Eg: Teaching

 Customer service = Service provided in support of a company's core products.  Eg: Motorola 1 year warranty

CLASSIFICATION OF ECONOMIC SECTORS
A. Based on stage in production chain: - Primary - Quaternary - Secondary - Quinary - Tertiary F. Based on ownership: - Public - Private - Voluntary

MARKETING SERVICES VERSUS PHYSICAL GOODS
1. 2. 3. 4. 5. 6. 7. 8. 9. No Customer ownership of services Service products as intangible performances Customer involvement in the production process People as part of the product Greater variability in operational inputs and outputs Difficulty of customer evaluation No inventories for Services after production Importance of the Time factor Different Distribution Channels

GOODS VS. SERVICES
CHARACTERISTICS
Product Ability to measure Customer perception Form Time interval Shelf life Procession Place Delivery Unit definition Product flexibility Pricing Marketing

GOODS
Tangible Objective Standardized Manufactured Before and after Days to years Utilitarian/ finite Product to consumer Consistent Precise Limited Cost basis Traditional / external

SERVICES
Intangible Subjective Must be consumed to evaluate Created Almost instantaneous Zero (perishable) Memories/ forever Consumer to product Heterogeneity/variable General Broad Limited cost basis Non traditional / largely internal

RELATION BETWEEN PRODUCTS AND SERVICES/ CATEGORIZATION OF SERVICES
T A N G I B I L I T Y
Product Major Product Hybrid Major Service Service

INTANGIBILITY

RELATION BETWEEN PRODUCTS AND SERVICES/ CATEGORIZATION OF SERVICES
Hi
Salt

Tangible Elements

Soft drinks CD Player Golf clubs New car Tailored clothing Furniture rental Fast food restaurant Plumbing repair Office cleaning Health club Airline flight Retail banking Insurance Weather forecast Intangible Elements

Lo

Hi

RELATION /CATEGORIZATION WITH EXAMPLES
PRODUCT / SERVICE EXAMPLE Pure tangible product Major product with accompanying minor service Equal product and service Major service with minor product Pure service Soap, toothpaste Car with warranty Consumer durable Restaurant Airline, Hospitals Massage, hair cut ACTUAL EXAMPLE HLL Hyundai, Maruti, LG, Samsung

Mc Donald’s Jet airways Lilavati Hospital Juice

GOODS/ PRODUCT SERVICE CONTINUUM

PURE GOODS

GOODS RELATED

HYBRID

SERVICE RELATED

PURE SERVICE

GOODS/ PRODUCT SERVICE CONTINUUM
Invest Cons Fast Ad Soft Deterg Autom Cosm Airline ment Teachi food agenc ultan ng drinks ents obile etics s Manag outlet y ement cy

Salt

Tangible Dominant

Intangible Dominant

TANGIBILITY SPECTRUM
Salt Car + Warranty

Restaurant

Tangible dominant Intangible Dominant

Hospital

Teaching

FEATURES OF SERVICE SECTOR
 Highly employee oriented and highly overstaffed  Under government control  Theoretically more socially beneficial  Difference in operating environment as compared to other countries  Dominated by procedures and statistics  “Customer is king” philosophy never works

 Increasing Use of Technology and Automation (80%+ of technology investment is for service industries)  Services add more economic value than agriculture, raw materials and manufacturing combined  In developed economies, employment is dominated by service jobs and most new job growth comes from service  Jobs range from high-paid professionals and technicians to minimum-wage positions

SIGNIFICANCE/ IMPORTANCE OF SERVICES MARKETING
 Job opportunities  Utilization of resources  Standard of living  Environmentally friendly technology

MODELS OF SERVICE MANAGEMENT
• The Industrial Management Model:

 Focus on revenue and operating costs  Ignores the role of personnel in customer satisfaction and sustainable profits  Hangover of manufacturing methods  Belief that factors that bring revenue are  advertising, sales promotion, accessibility,  distribution and location advantages  Cost drivers are personnel and operations

2) The Market- Focused Management Model:  Focuses on components that facilitate the firms delivery system  Proposes that the firm should be supportive of those personnel who serve the customer and interact with them  Emphasizes front line employees  Belief that factors that bring revenue are firms delivery system and personnel

THE TRANSFORMATION PROCESS

Inputs

Process

Output

Performance Measurement

EXAMPLES
Service system College Primary input Student Conversion process Desired output

Knowledge Educated transmission people Healthcare Food preparation Fill requests Healthy people Satisfied customers Satisfied customers

Hospital Restaurant Video store

Patient Customer Customer

CHAPTER 2:
SERVICE MARKETING ENVIRONMENT

POLITICAL LEGAL FORCES

TECHNOLOGY

PEST IMPACT

ECONOMIC CONDITIONS

SOCIO-CULTURAL FORCES

POLITICAL- LEGAL ENVIRONMENT
• • • • Taxes- Airlines, Hotel Rules & regulations Pricing- Gas, best bus, railways, Cellular De-regulation & privatization- Airlines, Banks • Consumer protection- Mc donalds hot coffee • Environmental laws

ECONOMIC ENVIRONMENT
• • • • • • Changing lifestyles Changing economies Changing technological advances Changing commercial needs Globalization Specialization

SOCIO- CULTURAL ENVIRONMENT
• • • • Lifestyle Social values Beliefs Culture affects services globally more than goods • “Adaptability of services”

TECHNOLOGICAL ENVIRONMENT
• Computers • Telecommunications • E-commerce • Innovations • SST`s

SST`S: SELF SERVICE TECHNOLOGIES
“Services produced entirely by the customer without any interaction with the firms employees.” Ultimate form of customer participation

Services produced entirely by the firm

Services produced entirely by the customer

Examples: • • • • • • • • • • • ATM Automated airline check-in Automated hotel check-in & check-out Electronic blood pressure machine Tax preparation software Internet banking Buying online Automated investment transactions Insurance online Internet shopping Phone banking

CHAPTER 3:
GROWTH OF SERVICE SECTOR

STATISTICS
Service Sector Contribution to GDP Sector 2003-04 2004-05 20.8 19.5 59.7 2005-06 19.9 19.4 60.7

Agriculture 22.2 Industry Services 19.5 58.3

REASONS FOR GROWTH OF SERVICE SECTOR
A. DEMOGRAPHIC FACTORS  High life expectancy  Structural shifts in communities/ development of new towns • ECONOMIC FACTORS  Globalization  Specialization

•    •      

POLITICAL FACTORS Huge infrastructure of government department Internalization Privatization/ deregulation SOCIAL FACTORS Increase in number of working people High quality of life Two income households More international travel and mobility Greater complexity of life Higher aspiration levels

•   

TECHNOLOGICAL FACTORS Innovations in various fields Range of new products Computer explosion OTHERS Manufacturing became expensive Increase in competition Availability of trained manpower Outsourcing of functions New inventions

•     

SCOPE OF SERVICE SECTOR:
Profit seeking organizations
Industry classification Housing Household Personal care Recreation and entertainment Medical and healthcare Business and professional Private education Financial Communication Transportation Examples Rentals, real-estate agents Repair and maintenance, electricity, plumbing, domestic help Beauty care, hair dressing, image services Parks, discos, D J services Diagnostic, dental, nursing, hospitalization Detective, legal, accounting, management consultancy Schools , colleges Insurance, banking, stock brokers Telephone, telex, fax, e-mail, internet, website, PR agencies, ad agencies BEST, rail , airways, parcel delivery services

Non- Profit seeking organizations
Service sector Education Religious Cultural Charitable Social cause Examples Universities, schools Temples, gurudwaras, churches, mosques Cultural events, theatres, zoos, museums Welfare groups and research foundations (red cross) Family planning, cancer eradication, environmental concerns Clubs Hospitals, health research institutes( Indian cancer society) Individual politicians, parties

Social Healthcare Political

CHAPTER 4:
CHARACTERISTICS OF SERVICES / 4 I`S OF SERVICES

INTANGIBILITY
 Cant be seen, touched or felt  Very difficult to evaluate or measure quality in services  Buyers look for signs/ evidence of quality  The customer cannot stake claim of ownership or procession of the service proposition: he can only experience the offer

INCONSISTENCY/ VARIABILITY/ HETEROGENEITY  No 2 services are identical  Standardization possible upto a point  Performance differs from place to place, time to time and person to person  Need to do away with variability

INSEPARABILITY/ SIMULTANEOUS PRODUCTION AND CONSUMPTION
 Services are sold, produced and consumed at the same time  The client participates in production and the service provider has direct contact with the client  Service provider and client may be physically present  Customer involvement in production process  Hard or impossible to mass produce

INVENTORY/ PERISHABILITY
 After the service is over it cannot be stored  Utility of most services is short lived  Cannot be produced ahead of time and stored for periods of peak demand  Need to produce a better match between demand and supply

STRATEGIES FOR INTANGIBILITY
1. Visualization 2. Association 3. Physical representation (Equipment, Uniforms, Colors, Logos and Mascots, Buildings, Communication Material, Business Cards) 5. Documentation 6. Facts and figures 7. People 8. Place

STRATEGIES FOR INCONSISTENCY
1. Industrialize Services 3. Training of Internal Customers 5. Training of external customers 7. Automation 9. Monitor Customer Satisfactions

STRATEGIES FOR INSEPARABILITY
1. Training of internal customers 3. Video conferencing

STRATEGIES FOR INVENTORY
• • • • • • • • • • • • Over marketing Managing Demand Differential pricing Cultivating non-peak demand Complementary services Reservation systems Managing Supply Part Time employees Peak time efficiency routines Increased consumer participation Shared services Facilities for future expansion

CHAPTER 5:
CLASSIFICATION OF SERVICES

I. ACCORDING TO LOVELOCK
Direct Recipient of the Service Nature of the Service Act DIRECTED AT PEOPLE
People Processing e.g., airlines, hospitals, hotels, restaurants, haircutting, fitness centers Mental Stimulus Processing e.g., broadcasting, consulting, education, psychotherapy

DIRECTED AT POSSESSIONS
Possession Processing e.g., freight, repair, cleaning, landscaping, retailing, recycling Information Processing e.g., accounting, banking, insurance, legal, research

TANGIBLE ACTS

INTANGIBLE ACTS

I. ACCORDING TO KOTLER
2. Equipment based v/s People based 4. Client presence v/s Client Non-presence 6. Personal need v/s Business Need 8. For profit v/s for Non-Profit 10.Private v/s Public ownership

I. OTHER CLASSIFICATIONS
1. Based on market segment 2. Based on degree of tangibility 3. Based on skills of service providers 4. Based on goals of the service provider 5. Based on degree of regulation 6. Based on degree of labour intensiveness 7. Based on degree of customer contact 8. Based on level of Tangibility

1. 2. 3. 4.

Based on customer- employee presence Based on customization/ empowerment Based on “drama” analogy of services Based on type of focus: product or process focus 5. Based on method of service delivery: single and multiple sites 6. Based on source of value: front office and back office 7. Based on type of end user

CHAPTER 6:
CONSUMER AND ORGANIZATIONAL BEHAVIOUR AND EXPECTATIONS

UNDERSTANDING CONSUMER NEEDS
Self Actualization Needs Esteem Needs Social Affiliation Security and Safety Basic Physiological needs

UNDERSTANDING CONSUMER EXPECTATIONS
Personal Needs Desired Service Beliefs about What Is Possible Explicit & Implicit Service Promises Word-of-Mouth Past Experience

ZONE OF TOLERANCE

Perceived Service Alterations Adequate Service Situational Factors Predicted Service

HOW CUSTOMERS EVALUATE SERVICE PERFORMANCE
Most Goods Most Services

Restaurant meals

Computer repair

Clothing

High in search attributes

High in experience attributes

High in credence attributes

CONTINUUM OF PRODUCT ATTRIBUTES

Complex surgery

Legal services

Motor vehicle

Lawn fertilizer

Haircut

Entertainment

Foods

Chair

Education

Easy to evaluate

Difficult to evaluate

FACTORS AFFECTING CONSUMER BUYING BEHAVIOUR TOWARDS SERVICES
SOCIAL FACTORS Family influence Reference group influence Roles and status CONSUMER AS DECISION MAKER Beliefs and attitudes Learning
Age & family life cycle Economic circumstances Occupation Personality & self concept Psychographics

CULTURAL FACTORS Culture Subculture Social class

PSYCHOLOGICAL FACTORS

PERSONAL FACTORS

COSUMER PURCHASE PROCESS
1. 2. 3. 4. 5. 6. Awareness/ Need Perception Search and Comprehension Attitude Development Evaluation of Alternatives Purchase and Consumption Adoption and Post Purchase Behavior

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