Service Marketing

SEMESTER 3
By
Prof. Sachin Khare
 Module 1
Introduction – Difference between Products & services, Key
characteristics of services
 Topics to be covered

• Meaning and Definition of Service

“ Any act or performance that one party can offer to another that is
essentially intangible and does not result in the ownership of
anything. Its production may not be tied to a physical product”
• Kotler, 1991
 Characteristics of services
• Intangibility
• Inseparability
• Variability
• Perishability
 Intangibility
• Services are performances or actions rather than objects.
• Services cannot be seen ,felt, tasted or touched.
• Service cannot be patented legally .
• Service cannot be measured in terms of quality , it can be only
compared.
• Decisions regarding advertising and promotions are difficult.
• Intangibility presents pricing problems.
• Pricing is difficult as it is hard to determine the actual cost of a “unit
of service” and price/quality relationship is complete.
 Inseparability
• Services cannot be separated.
• Services are typically produced and consumed simultaneously.
• The service provider and the client are often physically present when
consumption takes place.
• Generally, most goods are produced first, then sold and consumed.
• Services cannot be stored or transported.
 Variability/Heterogeneity
• Standardisation is difficult to achieve.
• No two services will be precisely alike.
• No two customers are precisely alike.
• Rules and procedures to reduce the role of human element.
• Hard to set up a quality control.
• Quality is determined only after the service has been performed.
• Heterogeneity is largely the result of human interaction.
 Perishability
• Unsold service time is loss.
• Cannot be inventoried.
• Demand forecasting and creative planning is challenging.
• When there are wide fluctuations in demand there should be a highly
flexible production system.
Differentiation between goods and
services
Physical Goods Services
A Thing. An activity or process.
Tangible Intangible
Homogeneous Heterogeneous
Production and distribution are separated from Production, distribution and consumption are
consumption. simultaneous process.
Customers do not participate in the production Customers may participate in the production
process.
Can be kept in stock Cannot be kept in stock
Transfer of ownership No transfer of ownership
 Classification Of Services
Service can be classified on the basis of different aspects such as
 Market Segment
• Service can be classified on the basis of market segment they are
catering to:
• Service catering to end consumers such as the hair salon and beauty
services , coaching classes and car wash services
• Services catering to organizational customers such as management
consulting, repair and maintenance services for machines and legal
services.
 Degree Of Tangibility
• Service can be classified into tangible offerings such as Food services
or Dry cleaning, and Intangible offerings such as Teaching and medical
services.
According to Judd(1964) Services can be classified as
• Rental Goods ( Hotel Room, Car etc.)
• Owned Goods (Laundry, Cleaning ,Repair of gadgets, etc.)
• Non –Good (Legal services, educational services, and social services )
 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.)
 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.)
 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.)
 Degree Of Labor Intensiveness
Services can be equipment based or people based.
Equipment based services –
• completed automated services (ATMs , Coffee Vending Machines etc.)
• Unskilled Operators (An offering through a machine with unskilled human
intervention in Movie theatre , Dry cleaning etc.)
• Skilled operator (Airlines , Crane machines , Railways etc.)
People based Services
• Unskilled (Security Guards, Cleaning services etc.)
• Skilled labor (Printing, catering etc.)
• Professionals (Lawyer ,Doctor ,Management consultant , HR Consultant etc.)
 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.
 Factors – Growth of Service Sector
• Liberalisation
• Foreign Direct Investment
• Better living standards
• High disposable income
• Convenience factors
• Dual income households
• New technological devices (Such as Gaming, Entertainment, satellite
and cable networks, new services, download texts, videos etc.)
 Challenges confronted by Service
Sector
• Infrastructure
• Technology
• Employees
• Consumers
• Competition
 Infrastructure
• Developing software technology parks
• Proper Roads, transport sector well developed
• Power, water and bandwidth availability is adequate
• The airports and local transport system needs to be revamped
 Technology
• E-commerce opened an additional channel of sales
• This has implication on nature of transactions, procurement and
delivery processes.
• Distribution channels greatly enhanced
• Instance availability of e-tickets
• Shopping on internet opens up new options for consumers
• Several issues of secure transactions and security of consumer
databases for the service firms
• Firms will have to look for larger volumes of business
 Critical Factors for Success
• Focus on customers
• Caring for employees
• Identification of Value Drivers
• Deploying Technology to a Firm’s Advantage
• Demand Management
 Introduction to service
economy
• Services account for 66% of GDP and is fastest growing sector of
economy
• Important net foreign exchange earner and most attractive sector for
FDI inflows
• As per first advance estimates of Central Statistics Office (CSO),
services sector is expected to grow at 8.8 per cent in 2016-17
• According to report by Market Research Store, the Indian
telecommunication services market is expected to grow by 10.3 per
cent year-on-year to reach US$ 103.9 billion by 2020.
 Introduction to service economy
Contd…
• Indian digital classifieds industry expected to grow three-fold to reach
US$ 1.2 billion by 2020, driven by growth in horizontal classifieds like
online services, real estate and automobiles
• Out of overall services sector, sub-sector comprising financial services,
real estate and professional services contributed US$ 305.8 billion or
20.5 per cent to the GDP
• Sub-sector of community, social and personal services contributed
US$ 188.2 billion or 12.6 per cent to the GDP
 Introduction to service economy
Contd..
• Government Initiatives
• Government of India recognizes importance of promoting growth in
services sectors and provides several incentives in wide variety of
sectors such as health care, tourism, education, engineering,
communications, transportation, information technology, banking,
finance, management, among others.
• Prime Minister Narendra Modi has stated that India's priority will be
to work towards trade facilitation agreement (TFA) for services, which
is expected to help in the smooth movement of professionals.
 Introduction to service economy
Contd…
• Government of India has adopted few initiatives in recent past. Some
of these are as follows:
• The Ministry of Electronics and Information Technology has launched
a services portal,
• Aims to provide seamless access to government services related to
education, health, electricity, water and local services, justice and law,
pensions and benefits, through a single window.
• The Government of India plans to significantly liberalise its visa
regime, including allowing multiple-entry tourist and business visas,
which is expected to boost India's services exports.
 Introduction to service economy
Contd…
• Mr. Ravi Shankar Prasad, Minister of Communication and Information Technology,
announced plan to increase number of common service centres or e-Seva centres
to 250,000 from 150,000 currently to enable village level entrepreneurs to interact
with national experts for guidance, besides serving as a e-services distribution
point.
• 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.
• The Reserve Bank of India (RBI) has allowed third-party white label automated
teller machines (ATM) to accept international cards, including international prepaid
cards, and has also allowed white label ATMs to tie up with any commercial bank
for cash supply.
 Introduction to service economy
Contd…
• The Indian facilities management market is expected to grow at 17
per cent CAGR between 2015 and 2020 and surpass the $19 billion
mark supported by booming real estate, retail, and hospitality sectors.
• The performance of trade, hotels and restaurants, and transport,
storage and communication sectors are expected to improve in FY17.
• The financing, insurance, real estate, and business services sectors
are also expected to continue their good run in FY17.