SERVICES 1

• The sector of Explosive growth

• More than 50% of the average family’s budget is
spent on services
• Share of services in the country’s GDP is about 60%
& likely to grow
• Service sector is expected to grow @7%
 SERVICE SECTOR 1

• Service sector dominates employment in advanced

industrial societies
• Consequence of the move towards the ‘post-industrial
society’
• Around three quarters of employment in this sector and
evidence of fast growth in recent years
• Major employers in this area – with important influence
on the global economy
• However, the concepts and metaphors of much of the
debate in the area are based around the manufacturing
sector

2
 1
THE SERVICE SECTOR and THE NEW
ECONOMY
► ◄
▼

Defining the New Economy

Creating Value in the Service Sector
Succeeding in the New Economy
 The Service Sector: 1
Creation of the New Economy
• Service opportunities create value in business and consumer
markets

• Services drive advanced economies

• Estimated 50% of work in industrialized countries is

knowledge work

• A transition into an information-led economy

• [the “New Economy”]

• Implication: competition in marketspace as well as the

marketplace
 Knowledge 1
Jobs
Innovation
Infrastructure Globalization

New Economy Indicators

Digital Dynamism/
Economy Competition
 The Economy 1

• The traditional economy - agriculture,

construction, manufacturing, wholesale, retail,
etc.

• A dominant service sector

• A technology-based economy -
high-tech companies, information firms
 1
Blended Products: Goods & Services

"Pure" Product " Pure" Service

hardware restaurant insurance

 Service Continuum 1
Service-dominated Teaching
item (intangible) Nursing
The theatre
Advertising agency
Air travel
Television

Balanced

Fast-food restaurant
Tailored suit
Automobile
House Balanced item
Dog food equally weighed
Good-dominated between goods
Necktie
item (tangible) Salt and services
 Continuum of Services 1

Pre-sale Transaction Post-sale

Services Services Services
 Service Firms Create Value 1

Service firms now account for the majority of GDP

and jobs in industrialized nations
The U.S. service sector – 6 key areas
1) Transportation and utilities
2) Wholesale trade
3) Retail trade
4) Fire, insurance and real estate (FIRE)
5) Other consumer and business services
6) Government services
Role of Services in an Economy 1
 1
Emergence of the New Economy
The Internet was the major change agent of the
new economy in past decade
Period of explosive growth (1995-2000)
characterized by over-investment in:

->CRM (Customer Relationship Mgt.)

->Systems
->Computer technology
->Liberally dispensed stock options
 Period of rapid descent (2000-2002): 1
* Failure of much-hyped virtual marketspace
to achieve business objectives

The 21st * Thousands of online businesses and

supporting companies failed
Century
* Hundreds of thousands of highly educated
technology managers laid off
New
* Inflated internet stocks crashed
Economy
* Local economies of high-tech cities
negatively impacted
 Period of Re-energization (2003):
1

The 21st * Stabilized and growing web sector;

only part of new economy
Century

New * Growth in online sales

Economy
 Major Drivers of the New 1
Economy
• Technology
• Globalization
• Market deregulation
• Customization
• Digitalization
• Connectivity
• Industry convergence
• New types of intermediaries
 1
8 Value-Adding Practices
☛ Personalization

☛ Offering tiered service levels

☛ Collecting information to enhance

customer experiences

☛ Keeping information simple

 8 Value-Adding Practices - cont. 1

☛ Respond to what customers do not like doing

☛ Providing one-stop shopping
☛ Balancing customer self-service with
support
☛ Get to know the customer best
 1
Source of Service Sector Growth
• Innovation
Push theory (e.g. Post-IT)
Pull theory (e.g. Cash Management)
Services derived from products (Video Rental)
Information driven services
Difficulty of testing service prototypes
• Social Trends
Aging of the population
Two-income families
Growth in number of single people
Home as sanctuary
 1
The New Experience Economy
Economy Agrarian Industrial Service Experience
Function Extract Make Deliver Stage
Nature Fungible Tangible Intangible Memorable
Attribute Natural Standardized Customized Personal
Method of Stored in Inventoried Delivered Revealed
supply bulk on demand over time

Seller Trader Manufacturer Provider Stager

Buyer Market User Client Guest

 What is a Service? 2
■ Products can be defined as goods, services,
and ideas
■Today’s economy is characterized
by relatively few pure goods
■ Most consumer and business products are
packaged with strong service components

-> Service challenge: tangibilize the intangible

 Service Definitions 2

Services are deeds, processes, and

performances.
-Valarie Zeithaml & Mary Jo Bitner

A service is a time-perishable, intangible

experience performed for a customer acting in
the role of a co-producer.
-James Fitzsimmons
 Definition of Service Firms 2

Service enterprises are organizations that

facilitate the production and distribution of
goods, support other firms in meeting their
goals, and add value to our personal lives.
-James Fitzsimmons
 Why do firms focus on Services? 2

• Services can provide higher profit margins and

growth potential than products

• Customer satisfaction and loyalty are driven

by service excellence

• Services can be used as a differentiation

strategy in competitive markets
 Why study Services Marketing? 2
• Service-based economies

• Service as a business imperative in manufacturing

and IT

• Deregulated industries and professional service

needs

• Services marketing is different

• Service equals profits

 What is Service? The Old View 2

• Service is a technical after-sale function that is provided by

the service department.

Old:
Old view of service = Service =
Customer Service Center wrench time
 What is Service? The New View 2

• Service includes every interaction between any customer and

anyone representing the company, including:
Dealers

Web site and

any e-channel Salespeople
Interaction

Billing and Customer Receptionists

Accounting and
Personnel Schedulers

Service Management
Employees and Executives
 Service Can Mean all of These 2

• Service as a product

• Customer service

• Services as value add

for goods

• Service embedded in a
tangible product
 2

Goods - things you can touch -

“tangible”
Services - things you can’t touch - but
you can see their effect “intangible”
“… services are not physical, they are
intangible…”
 2
Service
A Service is a type of a product.

“… a deed performed by one party for another…”

Discussions about the marketing of goods apply to
services as well.
Services have special characteristics that make
them different than products.
 2
Service

A product without physical characteristics;

a bundle of performance and symbolic attributes
designed to produce consumer want satisfaction.
 2
Goods and Services: Scale of
Elemental Dominance
S.No. Physical Goods Services
2
1. Tangible Intangible
2. Homogeneous Heterogeneous
3. Product and distribution Production, distribution
separated from and consumption re
consumption simultaneous process
4. A thing A activity
5. Core value produced in Core value produced in
factory buyer-seller interaction
6. Customers do not Customers participate in
participate in the production
production process
7. Can be kept in stock Cannot be kept in stock
8. Transfer of ownership No transfer of ownership
Comparing Goods and Services
2
 Tangible / Intangible Attributes 2

• Tangible • Intangible
– touch – can’t touch
– see – can’t see
– taste – can’t taste
– smell – can’t smell
 4 Characteristics of Services
1. Intangibility - “u can’t touch this”
2. Production (or performing the service) and
Consumption (using the service) - happens at
the same time
3. Heterogeneity - services are not always
delivered the same way

4. Perishability - cannot be put in inventory or

stored for later use
ie. You can’t buy 2 haircuts
 Characteristics of Services

1. Intangibility - “u can’t touch this”

• Services cannot be stored
• Services cannot be protected through patents
- therefore a really great travel package and
service can be copied
a really great physical object can be patented,
and NOT allowed to be copied
 Characteristics of Services

1. Intangibility - “u can’t touch this”

• Hard to explain and display Services if you can’t
see them
• Prices are difficult to set - depends on
customers expectations
 Characteristics of Services

1. Intangibility - “u can’t touch this”

Marketing Strategies
• stress tangible cues, eg. Smiling face
• use personal information, sources, references
• use word-of-mouth
• contact customers after they buy to stimulate
continued enthusiasm and hope they “talk it up”
 Characteristics of Services

2. Inseparability of Production (or performing

the service) and Consumption (using the
service) - happens at the same time

• Many people involved in delivering a service

• mass production of services is hard to do
 Characteristics of Services

2. Inseparability of Production (or performing

the service) and Consumption (using the
service) - happens at the same time

Marketing Strategies
• Emphasize how much you train your people - so their
ability to give you good service will be high
• Have many locations so customers can get to you
• ie. Insurance sales come to your home
 Characteristics of Services

3. Heterogeneity - services are not always

delivered the same way
It is very difficult to standardize services
eg. A machine can make ice cream cones a
standard size 100% of the time
A person filling an ice cream cone with a scoop
cannot do it the same amount each time, unless
you use a machine to dispense the ice cream
 Characteristics of Services

3. Heterogeneity - services are not always

delivered the same way
It is very difficult to standardize services
eg. A Taxi driver cannot drive you to the office in
exactly the same time each day because the traffic
patterns change
eg. A travel agent can sell you a vacation package -
but cannot guarantee you will like the trip exactly
the same way another tourist did.
 Characteristics of Services

4. Perishability - cannot be put in inventory or

stored for later use
ie. You can’t buy 2 haircuts

5. Nature of Demand -
Demand fluctuates and changes, sometimes
depending on the season, or weather
eg. Taxi in the rain, vacation in summer
 How can demand be managed?
• accurate demand forecasting
• develop off-peak and on-peak strategies
• use reservation systems and differential
pricing
• employ part-time staff
• extend hours of operation
• Provide self-service options (i.e. ATMs,
internet banking)
 Service Providers
service providers have product lines and product mixes as
well
examples
• Mastercard
• insurance
• telephone services
• cable services
• ISPs - internet service providers
• airlines, first class, economy class
• banks
 MAJOR BENEFITS OF SERVICE SECTOR

• To provide largest no. of jobs

• Least affected by recession & highly stable
• Potential for global trade in services with
the implementation of WTO
 EXPANDING HORIZONS OF SERVICES
1. Financial services
Banking
Insurance
Leasing
Merchant banking
Venture Capital

2. Postal & Courier services

Mass mailing services
Insurance
Space for advertisements
 EXPANDING HORIZONS OF
SERVICES…..
3. Transport
4. Tourism
5. Hotel/ Hospitality
6. Health care
7. Personal care
Beauty
Hairstyle
Gym
 EXPANDING HORIZONS OF SERVICES…..
8. Education
9. Professional services
Taxation
Career counselling
Legal counselling
Investment Management
Consultancy
Construction – Turn key projects
Event Management
- Trade exhibition,seminars, meetings, workshops, marriages
 EXPANDING HORIZONS OF SERVICES…..
10. Entertainment / Leisure
- Cinema, Water park
11. News Agencies
- T.V., Net, Paper, Radio
12. Information Services
- Yellow pages, Ask me
13. Public Utilities
- power, Sanitation
14. Information Technology
15. Product Support Services
- Installation, Repair & Maintanence
 EXPANDING HORIZONS OF SERVICES…..
16. Domestic services
- Laundry, Gardening, Child care, security,Pest Mgt
17. Govt. Services
- Birth certificate, cast certificate
( network between Panchayaths & Munciplaities)
18. Social & Not- For-Profit service
- police
- Polio immunization
- Protection of Environment
 Classification of Services
Service can be classified in several ways. Various
authors have tried to classify services on the
basis of different features /aspects such as the
market segments, tangibility factor, skill type,
etc. They are enlisted below.
1. Market segment
2. Degree of tangibility
3. Skills of the service provider

52
 Classification of Services (Contd.)
4. Goals of the service provider
5. Degree of regulation
6. Degree of labor intensiveness
7. Degree of customer contact

In India service sector contributes 60 % of the GDP and

35 % of employment. Around 80 % of India’s total exports
are dominated by high skilled services , such as software
business services and communication services.

53
 1. Market Segment

Market Segment : Service can be classified on

the basis of market segment they are catering
to. Thus we can have service catering to end
consumers such as the hair salon and beauty
services , coaching classes and car wash services
and services catering to organizational
customers such as management consulting,
repair and maintenance services for machines
and legal services.
54
 2. Degree of Tangibility

Service can be classified into tangible offerings

• Rental Goods ( Hotel Room, Car etc.)
• Owned Goods (T.V Repair etc.)
• Non –Good (College education )

55
 3. Skills of the Service Provider

Service can be provided by highly skilled labour

and unskilled labour. Thus service can be
classified as
• Professional ( Legal, Medical , management etc. )
• Non professional ( Taxi, security , shoe shining,
laundry, cleaning services etc.)

56
 4. Goals of the Service Provider

Service are differentiated on the basis of the

goals they pursue-whether they are profit
making or non profit making.
• Profit ( Airlines, Hotels , Insurance etc)
• Non-profit ( Indian Postal Service , NGO, Public
libraries , Religious Places etc.)

57
 5. Degree of Regulation

Service are also classified according to the

extent of government regulation on them.
• High Regulation ( Airlines, Railways , and
Roadways etc.)
• Limited Regulation ( Hospitality sector )
• Absent Regulation ( Barber and Beauty Service,
Personal services, etc.)

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 Degree of Labor Intensiveness

Services can be equipment based or people

based.
Equipment based services –
• Completely automated services (ATMs , Coffee
Vending Machines etc.)
• Unskilled Operators (Movie theatre , Drycleaning,
etc.)
• Skilled operator (Airlines , Crane machines,
Railways etc.)

59
 6. People based Services

Unskilled (Security Guards, Cleaning services,

etc.)
• Skilled labor (Printing, catering etc.)
• Professionals (Lawyer, Doctor, Management
consultant , HR Consultant etc.)

60
 7. Degree of Customer Contact

Service is categorized on the basis of customer

Contact
– High Contact – Where customer spends time, days
, week , month , year like education and
hospitality services
– Low Contact – Low contact service is one which
the contact with service system ranges from few
minutes to some hours like appliance repair
service, postal services etc.

61
 Significance of Service Marketing
• Intensive competition
• Growing consumer awareness
• Increasing specialization (hospitals, hotels)
• Market sophistication
• Technology
 Marketing has revolutionized the Service
sector
• Tangibilising the intangibles
eg. Changing the smell of hospital
Comfortable stay at hospital
Network class room
• Managing Differentiation in terms of offering, Delivery &
Image
• Managing service Quality
Customer is the Boss & Boss is always right
• Standardization & customisation
Marketing has revolutionized the Service
sector…………
• Industrialising the services
• Synchronising the Demand & Supply
• Internal Marketing
( satisfy our own employees)
• Interactive marketing
( Interaction with customers)
• Relationship Marketing
( establishing relationships with customers)
Application of Technology
( Airways- print ticket from computer)
 Why should you Focus on service marketing

• Tremendous scope for employment

• Highly rewarding
• Globalised opportunities
• Challenging
• Scope for innovation
• Scope for self employment (we help)
• Suited for women ( customer courtesy)
 Challenges for Services
• Defining and improving quality
• Designing and testing new services
• Communicating and maintaining a consistent image
• Accommodating fluctuating demand
• Motivating and sustaining employee commitment
• Coordinating marketing, operations, and human
resource efforts
• Setting prices
• Finding a balance between standardization versus
personalization
• Ensuring the delivery of consistent quality