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Module 1

Concept of services Characteristics Goods vs. services Scope & significance of service marketing Growth & role of service sector Classification of services Service marketing mix

Defining the Essence of Service:


An act or performance offered by one party to another An economic activity that does not result in ownership

A process that creates benefits by facilitating a desired change in:


Customers themselves Physical possessions Intangible assets

Defining the Services:


act, deed or performance of an intangible nature that does not result in ownership of a tangible commodity but creates value and benefits for the customer
A service is an

Some Industries in the Service Sector


Banking, stockbroking Health care

Lodging
Restaurants, bars, catering

Education
Wholesaling and retailing

Insurance
News and entertainment

Laundries, drycleaning
Repair and maintenance Professional (e.g., law, architecture, consulting)

Transportation (freight and passenger)

Service marketing triangle


Organisation

Internal marketing enabling the promise

Satisfaction; Quality; Brand Loyalty

Traditional/external marketing setting the promise

Employees

Interactive/Relationship marketing delivering the promise

Customers

Characteristics of Services Compared to Goods


Intangibility Heterogeneity

Simultaneous Production and Consumption

Perishability

The Goods-Services Continuum


Canned foods Readymade clothes Automobiles Draperies, Carpets Restaurant meals Repairs: auto, house, landscaping Air travel Insurance, Consulting, Teaching

MOSTLY GOODS

MOSTLY SERVICES

Five Is of services

1.Intangibility 2.Inconsistency 3.Inseparability 4.Inventory(less) 5.involvement

Differences between products & services


CHARACTERSTICS GOODS SERVICES

Physical shape Process design Production Delivery Supply Producer status Life Title Physical presence of customer Customer involvement Type of technology

Tangible Customer not involved Time spread Separated with production schedule Flexible Separable Longer life Ownership possible Hardly required Low / absent Generally hard

Intangible Immediate effect on customer Spontaneous Along with production Inflexible Inseparable for services Still born No ownership possible Absolutely necessary for many services High Generally soft

Other Differences (contd.)


CHARACTERSTICS GOODS SERVICES

Consumer reaction
Repairs Replacement Pricing base Need satisfied Basis of competition Channel of distribution

Delayed
Common Common Material Physical Technology Longer

Spontaneous
Generally Impossible Rare Labor More emotional Personalization Shorter

Standardization
Facility location Product design

All over
Near supply Physical product

Only for routine services


Close to customer Role is more vital

Other Differences (contd.)


CHARACTERSTICS GOODS SERVICES

Storage

Possible

Not possible

Inventory Quality control


Workers skills Forecasting Facility layout

Raw material Fixed


Technical Longer To enhance production

Personnel Variable
Interaction Shorter To accommodate customer physical & psychological needs Important

Role of physical surroundings

Not so important

Classification of Services
The Degree of Tangibility of Services
Restaurant Services V/S Consultant Services

Whether the Service is Directed to the Customer or His Possession


haircut or hotel check in v/s car or TV repair

The Time & Place of Service Delivery


Pest control has to be on site, but software services can be provided via internet in any location

Level of Customization V/S Standardization


Some services are more customized like lawyers, doctors. On the other hand few services are standardized like a computer course, Mc Donalds menu etc.

Classification of Services
Formal or Informal Relationship with Customers
Clubs require formal membership whereas Disneyworld, or a movie theatre only requires people to buy a ticket

Extent to which Demand & Supply Fluctuate


Some services have steady demand example a downtown restaurant and some services have highly fluctuating demand on the basis of time of the day, season etc. like electric power.

Interaction with People or Inanimate objects/Environment


Some transactions could be done on phone while others require physical presence like taking a flight

Classification of Services
People
Services directed to Peoples Bodies:

Who or What is the Direct Recipient of Services?


Things
Services directed at Goods & Other Physical Possessions:

Tangible Actions

Health

care Passenger transport Beauty Salons

Freight Transportation Industrial equipment repair Laundry & Dry Cleaning Veterinary care

Services directed to Peoples Mind:


Intangible Actions
Education

Services directed at Intangible Assets:


Banking Legal Services Accounting Insurance Securities

Broadcasting Theatre Museum

Classification of Services
Nature of Service Delivery

Type of Relationship between Service Organization & Customer No Formal Relation


Radio

Membership Relation
Insurance Telephone subscription College enrollment Banking

station

Continuous Delivery of Service

Police protection Public highway

Toll highway
Theater series subscription

Pay phone Movie theater Public transportation Restaurant

Discrete Transactions

Commuter ticket or transit pass

Classification of Services
High
Extent to Which Customer Contact Personnel Exercise Judgment in Meeting Individual Customer Needs

Extent to which Service Characteristics are Customized Low


Education

Legal services
Health care/surgery

(large classes)

High

Preventive health programs

Beautician Plumber Education (tutorials)

Low

Telephone service Hotel services Retail banking (excl. Major loans) Good restaurant

Public transportation

Routine appliance repair Fast food restaurant Movie theater

Classification of Services

What is the Nature of Demand for the Service relative to Supply?

Extent to Which Supply is Constrained Peak demand can usually be met without a major delay

Extent of Demand Fluctuations over Time

Wide
Electricity Hospital Police and fire emergencies

Narrow
Insurance Legal services Banking

Peak demand regularly exceeds capacity

Accounting and tax preparation Passenger transportation Hotels and motels Restaurants Theaters

Services similar to those mentioned above but which have insufficient capacity for their base level of business

Role of Service sector in economy


The service concepts were built around products and essential services delivered mostly in an unorganized setting. The 1990s brought about a change in the way services were defined as well as delivered. Since then, the Indian GDP growth has been increasingly services led because of factors like deregulation, liberalization of FDI and greater participation of private investment. As a result, the service sectors share has grown from 44% of GDP in 1990-91 to over 55% of GDP currently.

Role of Service sector in economy


The era of economic liberalization has transformed India from agriculture-based economy to a knowledge-based economy. Service sector is a large dynamic part of the Indian economy in terms of employment potential and contribution to national income. Services sector, contributed as much as 68.6 per cent of the overall average growth in GDP between the years 2002-03 and 2006-07. The most important services in the Indian economy has been health and education.

Growth of Services in India


Service Sector in India today accounts for more than half of India's GDP. According to data for the financial year 2006-2007, services "tertiary sector" 55.1 per cent Industry 26.4 per cent agriculture 18.5 per cent Share in India's GDP. The fact that the service sector now accounts for more than half the GDP marks evolution of the Indian economy and takes it closer to the fundamentals of a developed economy.
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Growth of Service Sector


Liberalization in regulatory framework Increased disposable income in the hands of people Changing consumer attitude & lifestyle

Increased productivity & automation in agriculture & industry (manufacturing)


Faster technological developments

Service marketing mix


1. Product elements 2. Price and other user outlays 3. Place, cyberspace, and time 4. Promotion and education

5. People
6. Physical evidence

7. Process
8. Productivity and quality

Expanded Marketing Mix for Services

The Nature of Service (Product) Offering


Service providers take holistic view of their entire performance they want customers to experience
The design task must therefore address and integrate three key components:

1
2

The Core Product


Supplementary Services Delivery Process

Core and Supplementary Services in a Luxury Hotel


Reservation Cashier Business Center A Bed for the Night in an Elegant Private Room with a Bathroom Valet Parking Reception Baggage Service

Room Service Wake-up Call T elephone

Cocktail Bar
Entertainment/ Sports / Exercise

Restaurant

Documenting the Delivery Sequence Over Time


Reservation Parking Check in Get car Check out Phone USE GUESTROOM OVERNIGHT

USE ROOM
Porter Meal

Pay TV

Room service

Before Visit

Time Frame of an Overnight Hotel Stay (real-time service use)

New Service Development Categories


Major service innovations--new core products for previously undefined markets Major process innovations--using new processes to deliver existing products and offer extra benefits Product line extensions--additions to current product lines Process line extensions--alternative delivery procedures Supplementary service innovations--adding new or improved facilitating or enhancing elements Style changes--visible changes in service design or scripts

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