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

B. Based on ownership:

- Public

- Private

- Voluntary

MARKETING SERVICES VERSUS PHYSICAL GOODS

1. No Customer ownership of services

2. Service products as intangible performances

3. Customer involvement in the production process

4. People as part of the product

5. Greater variability in operational inputs and outputs

6. Difficulty of customer evaluation

7. No inventories for Services after production

8. Importance of the Time factor

9. Different Distribution Channels

GOODS VS. SERVICES

CHARACTERISTICS GOODS SERVICES

Product Tangible Intangible

Ability to measure Objective Subjective

Customer perception Standardized Must be consumed to evaluate

Form Manufactured Created

Time interval Before and after Almost instantaneous

Shelf life Days to years Zero (perishable)

Procession Utilitarian/ finite Memories/ forever

Place Product to consumer Consumer to product

Delivery Consistent Heterogeneity/variable

Unit definition Precise General

Product flexibility Limited Broad

Pricing Cost basis Limited cost basis

Marketing Traditional / external Non traditional / largely internal

RELATION BETWEEN PRODUCTS AND SERVICES/ CATEGORIZATION OF SERVICES

Service

Major Service

Hybrid

Major Product

ProductTANGIBILITY

INTANGIBILITY

RELATION BETWEEN PRODUCTS AND SERVICES/ CATEGORIZATION OF SERVICES

Fast food restaurantPlumbing repair

Office cleaningHealth club

Airline flightRetail banking

InsuranceWeather forecast

Salt

Soft drinksCD Player

Golf clubsNew car

Tailored clothingFurniture rental

Lo Hi

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ents

Intangible Elements

RELATION /CATEGORIZATION WITH EXAMPLES

PRODUCT / SERVICE EXAMPLE ACTUAL EXAMPLE

Pure tangible product Soap, toothpaste

HLL

Major product with accompanying minor service

Car with warrantyConsumer durable

Hyundai, Maruti,LG, Samsung

Equal product and service

Restaurant Mc Donald’s

Major service with minor product

Airline, Hospitals

Jet airwaysLilavati Hospital

Pure service Massage, hair cut

Juice

GOODS/ PRODUCT SERVICE CONTINUUM

PURE GOODS HYBRID SERVICE PURE GOODS RELATED RELATED SERVICE

GOODS/ PRODUCT SERVICE CONTINUUM

Soft drinks

Detergents

SaltAutomobile

Cosmetics

Fast food outlet

Ad agenc

y

Airlines

Investment

Management

Consultan

cy

Teaching

Tangible Dominant Intangible Dominant

Tangible dominant

Intangible Dominant

Salt

TANGIBILITY SPECTRUM

Car + Warranty

Restaurant

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

1) 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

Inputs Process Output

Performance Measurement

THE TRANSFORMATION PROCESS

Service system

Primary input

Conversion process

Desired output

College Student Knowledge transmission

Educated people

Hospital Patient Healthcare Healthy people

Restaurant Customer Food preparation

Satisfied customers

Video store Customer Fill requests Satisfied customers

EXAMPLES

CHAPTER 2:

SERVICE MARKETING

ENVIRONMENT

PEST IMPACT

POLITICAL LEGAL FORCES

ECONOMIC CONDITIONS

SOCIO-CULTURAL FORCES

TECHNOLOGY

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 Services produced entirely by the firm 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

Sector 2003-04 2004-05 2005-06

Agriculture 22.2 20.8 19.9

Industry 19.5 19.5 19.4

Services 58.3 59.7 60.7

Service Sector Contribution to GDP

REASONS FOR GROWTH OF SERVICE SECTOR

A. DEMOGRAPHIC FACTORS High life expectancy Structural shifts in communities/ development

of new towns

B. ECONOMIC FACTORS Globalization Specialization

C. POLITICAL FACTORS Huge infrastructure of government department Internalization Privatization/ deregulation

D. 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

E. TECHNOLOGICAL FACTORS Innovations in various fields Range of new products Computer explosion

F. 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 Examples

Housing Rentals, real-estate agents

Household Repair and maintenance, electricity, plumbing, domestic help

Personal care Beauty care, hair dressing, image services

Recreation and entertainment Parks, discos, D J services

Medical and healthcare Diagnostic, dental, nursing, hospitalization

Business and professional Detective, legal, accounting, management consultancy

Private education Schools , colleges

Financial Insurance, banking, stock brokers

Communication Telephone, telex, fax, e-mail, internet, website, PR agencies, ad agencies

Transportation BEST, rail , airways, parcel delivery services

Non- Profit seeking organizations

Service sector Examples

Education Universities, schools

Religious Temples, gurudwaras, churches, mosques

Cultural Cultural events, theatres, zoos, museums

Charitable Welfare groups and research foundations (red cross)

Social cause Family planning, cancer eradication, environmental concerns

Social Clubs

Healthcare Hospitals, health research institutes( Indian cancer society)

Political Individual politicians, parties

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)

4. Documentation 5. Facts and figures 6. People 7. Place

STRATEGIES FOR INCONSISTENCY

1. Industrialize Services

2. Training of Internal Customers

3. Training of external customers

4. Automation

5. Monitor Customer Satisfactions

STRATEGIES FOR INSEPARABILITY

1. Training of internal customers

2. Video conferencing

STRATEGIES FOR INVENTORY

1) Over marketing 2) Managing Demand • Differential pricing • Cultivating non-peak demand • Complementary services • Reservation systems 3) Managing Supply • Part Time employees • Peak time efficiency routines • Increased consumer participation • Shared services • Facilities for future expansion

CHAPTER 5:

CLASSIFICATION OF SERVICES

Direct Recipient of the Service

Natureof the Service Act

DIRECTED AT PEOPLE

DIRECTED AT POSSESSIONS

TANGIBLEACTS

People Processinge.g., airlines, hospitals,hotels, restaurants, haircutting, fitness centers

Possession Processing

e.g., freight, repair, cleaning,

landscaping, retailing, recycling

INTANGIBLEACTS

Mental Stimulus Processinge.g., broadcasting, consulting,education, psychotherapy

Information Processinge.g., accounting, banking,insurance, legal, research

I. ACCORDING TO LOVELOCK

1. Equipment based v/s People based

2. Client presence v/s Client Non-presence

3. Personal need v/s Business Need

4. For profit v/s for Non-Profit

5. Private v/s Public ownership

II. ACCORDING TO KOTLER

III.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

9. Based on customer- employee presence

10. Based on customization/ empowerment

11. Based on “drama” analogy of services

12. Based on type of focus: product or process focus

13. Based on method of service delivery: single and multiple sites

14. Based on source of value: front office and back office

15. 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

Predicted Service

Explicit & Implicit

Service Promises

Word-of-Mouth

Past ExperienceDesired Service

ZONE

OF

TOLERANCE

Adequate Service

Personal Needs

Beliefs about

What Is Possible

Perceived Service

Alterations

Situational Factors

HOW CUSTOMERS EVALUATE SERVICE PERFORMANCE

Most Goods

High in search attributes

High in experience attributes

High in credence attributes

Difficult to evaluate

Easy to evaluate

Most ServicesC

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Ed

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nCONTINUUM OF PRODUCT ATTRIBUTES

PSYCHOLOGICAL FACTORS PERSONAL FACTORS

CULTURAL FACTORSSOCIAL FACTORS

CONSUMER AS DECISION MAKER

Family influence

Reference group influence

Roles and status

Culture

Subculture

Social class

Beliefs and attitudes

Learning

Age & family life cycle

Economic circumstances

Occupation

Personality & self concept

Psychographics

FACTORS AFFECTING CONSUMER BUYING BEHAVIOUR TOWARDS SERVICES

COSUMER PURCHASE PROCESS

1. Awareness/ Need Perception

2. Search and Comprehension

3. Attitude Development

4. Evaluation of Alternatives

5. Purchase and Consumption

6. Adoption and Post Purchase Behavior