Wednesday, July 22, 2015

SM: Session 1 Foundations for Services Marketing

Service sector is the most growing sector in most of the economies. It is one of the parameter for economic growth with the manufacturing sector and agriculture, forestry and fishing. If we look at the Compounded Annual Growth Rate (CAGR), the service sector is grown by 8.5% and the service sector is 57% of the total GDP.

Service sector is broadly classified as 
  • Trade, Hotels, Transport, Storage and Communications
  • Financing, Insurance, Real estate & Business services
  • Community, Social & Personal Services
Thus, services play a major role in development of any country. Research indicates that the growth and advancement in service industry is an important indicator of progress of any country. Service industry offers the best jobs, hires the most talented manpower and provides the best income.

What are services?

According to Theodore Levitt,

“THERE ARE NO SUCH THING AS SERVICE INDUSTRIES. THERE ARE ONLY INDUSTRIES WHOSE SERVICE COMPONENTS ARE GREATER OR LESS THAN THOSE OF OTHER INDUSTRIES. EVERYBODY IS IN SERVICE.”

Each and every product purchase involve some kind of service. Some are more product oriented and some are more service oriented. In practical sense, it is impossible to find a pure product or a pure service. Services can be understood in following perspectives:

Service as Industries and Companies
Indian Economy is classified into three sectors: 
  • Industry - consists of Mining and Quarrying, Manufacturing, Electricity, Gas and Water Supply and Construction
  • Agriculture, Forestry and Fishing
  • Services - consists of Trade, Hotel, Transport and Communication, Financing, Insurance, Real Estate and Business Services and Community, Social and Personal Service

Services as a Product

Service companies have products as offering. At times, non-service companies also offer service products. Software companies offer software as products, a beauty parlour have different haircuts and beauty treatments as products, travel agencies have different itineraries as products. On-service companies like auto-dealers have Annual Maintenance Contacts as service products.

Customer Service

Customer service is a part of the product offering. Companies do not charge anything for these services. The services that are offered in a shopping mall by the retailer are customer service. 

Derived Service

This perspective deals with the concept of value derivation. Customers view service as a holistic concept embedded in products. They value a product in terms of all the tangible and intangible benefits they derive from the product.

Defining Services

According to Kotler, " A service is any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product"

Also, Service are defined as "economic activities offered by one party to another, most commonly employ time-based performances to bring about desired results. In exchange for their money, time, and effort, service customers expect to obtain value from access to goods, labor, facilities, environments, professional skills, networks, and systems; normally do not take ownership of any of the physical elements involved. 

Scope of Services

Services are often viewed as a combination of goods and services. Many marketers' offerings is divided into core product element and supplementary services. These services are designed to increase the value of the physical product and is the key differentiating element. Also, there are marketers who offer core service products rather than marketing products through services.

The service goods Continuum divides pure goods and pure services on the basis of tangibility. More tangible products are known as goods and less tangible are known as services.

According to Lynn Shostack, "the greater the weight of intangible elements in a market entity, the greater will be the divergence from product marketing in priorities and approach". Marketing of goods tend to provide abstract evidences to support the product. Service marketers, on the other hand, should be focused on enhancing and differentiating "realities" through manipulation of tangible clues to create evidences.

Some businesses in which tangible and intangible elements carry equal weight emphasize abstractions and evidence in about equal proportions, for example, McDonald's. Shostack has developed a scale known as Goods-service continuum. 



Industries classified under services

Broadly, the following industries may be called as service industries
Most of it can be understood as "T" shaped or "I" shaped. "T" shaped service industries are those where the core business requires deep understanding of  their own discipline such as business, engineering or computer sciences (for example IBM) explained by the vertical part of "T". The horizontal part explains their service orientation. The "I" shaped industries are more dominated by the horizontal part i.e. service orientation.

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