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

F. 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
T Product
A Major
N
Product
G
I
B Hybrid
I
L Major
I Service
T
Y Service

INTANGIBILITY
 RELATION BETWEEN PRODUCTS AND
SERVICES/ CATEGORIZATION OF SERVICES

Hi
Salt
Soft drinks
CD Player
Golf clubs
New car
Tangible Elements

Tailored clothing
Furniture rental
Fast food restaurant
Plumbing repair
Office cleaning
Health club
Airline flight
Retail banking
Insurance
Weather forecast
Lo Intangible Elements Hi
RELATION /CATEGORIZATION WITH EXAMPLES

PRODUCT / SERVICE EXAMPLE ACTUAL

EXAMPLE
Pure tangible product Soap, HLL
toothpaste
Major product with Car with Hyundai, Maruti,
accompanying minor warranty LG, Samsung
service Consumer
durable
Equal product and Restaurant Mc Donald’s
service
Major service with Airline, Jet airways
minor product Hospitals Lilavati Hospital
Pure service Massage, hair Juice
cut
 GOODS/ PRODUCT SERVICE
CONTINUUM

PURE GOODS HYBRID SERVICE PURE

GOODS RELATED RELATED SERVICE
 GOODS/ PRODUCT SERVICE
CONTINUUM

Invest Cons
Fast Ad
Soft Deterg Autom Cosm Airline ment Teachi
Salt
drinks ents obile etics
food agenc
s Manag
ultan ng
outlet y
ement cy

Tangible Dominant Intangible Dominant

 TANGIBILITY SPECTRUM
Salt
Car + Warranty

Restaurant

Tangible dominant

Intangible Dominant

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
• 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
THE TRANSFORMATION PROCESS

Inputs Process Output

Performance
Measurement
 EXAMPLES

Service Primary Conversion Desired

system input process output

College Student Knowledge Educated

transmission people

Hospital Patient Healthcare Healthy

people
Restaurant Customer Food Satisfied
preparation customers

Video store Customer Fill requests Satisfied

customers
CHAPTER 2:
SERVICE
MARKETING
ENVIRONMENT
 POLITICAL
LEGAL FORCES

TECHNOLOGY PEST ECONOMIC

CONDITIONS
IMPACT

SOCIO-CULTURAL
FORCES
 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
Service Sector Contribution to GDP

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

 REASONS FOR GROWTH OF
SERVICE SECTOR
A. DEMOGRAPHIC FACTORS
 High life expectancy
 Structural shifts in communities/ development
of new towns

• ECONOMIC FACTORS
 Globalization
 Specialization
• POLITICAL FACTORS
 Huge infrastructure of government department
 Internalization
 Privatization/ deregulation

• 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
• TECHNOLOGICAL FACTORS
 Innovations in various fields
 Range of new products
 Computer explosion

• 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
Housing
Household
Personal care
Recreation and entertainment
Medical and healthcare
Business and professional
Private education
Financial
Communication
Transportation
Examples
Rentals, real-estate agents
Repair and maintenance, electricity,
plumbing, domestic help
Beauty care, hair dressing, image
services
Parks, discos, D J services
Diagnostic, dental, nursing,
hospitalization
Detective, legal, accounting,
management consultancy
Schools , colleges
Insurance, banking, stock brokers
Telephone, telex, fax, e-mail, internet,
website, PR agencies, ad agencies
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)
5. Documentation
6. Facts and figures
7. People
8. Place
STRATEGIES FOR INCONSISTENCY
1. Industrialize Services

3. Training of Internal Customers

5. Training of external customers

7. Automation

9. Monitor Customer Satisfactions

STRATEGIES FOR INSEPARABILITY

1. Training of internal customers

3. Video conferencing
 STRATEGIES FOR INVENTORY
• Over marketing
• Managing Demand
• Differential pricing
• Cultivating non-peak demand
• Complementary services
• Reservation systems
• Managing Supply
• Part Time employees
• Peak time efficiency routines
• Increased consumer participation
• Shared services
• Facilities for future expansion
 CHAPTER 5:
CLASSIFICATION OF
SERVICES
 I. ACCORDING TO LOVELOCK

Direct Recipient of the Service

Nature DIRECTED AT DIRECTED AT

of the Service Act PEOPLE POSSESSIONS
People Processing Possession
e.g., airlines, Processing
TANGIBLE hospitals, e.g., freight, repair,
ACTS hotels, restaurants, cleaning,
haircutting, fitness landscaping, retailing,
centers recycling
Mental Stimulus Information
Processing Processing
INTANGIBLE e.g., broadcasting, e.g., accounting,
ACTS consulting, banking,
education, insurance, legal,
psychotherapy research
 I. ACCORDING TO KOTLER

2. Equipment based v/s People based

4. Client presence v/s Client Non-presence

6. Personal need v/s Business Need

8. For profit v/s for Non-Profit

10.Private v/s Public ownership

 I. 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
1. Based on customer- employee presence
2. Based on customization/ empowerment
3. Based on “drama” analogy of services
4. Based on type of focus: product or process
focus
5. Based on method of service delivery: single
and multiple sites
6. Based on source of value: front office and back
office
7. 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
Explicit & Implicit
Personal Needs Service Promises
Word-of-Mouth
Desired Service
Past Experience
Beliefs about
What Is Possible
ZONE
OF
TOLERANCE
Perceived Service
Alterations

Adequate Service Predicted Service

Situational Factors
 HOW CUSTOMERS EVALUATE SERVICE
PERFORMANCE
Most Goods Most Services

Easy Difficult
to evaluate to evaluate
Restaurant meals

Computer repair
Clothing

Complex surgery
Legal services
Motor vehicle

Haircut
Lawn fertilizer

Entertainment
Foods
Chair

Education
High in search High in experience High in credence
attributes attributes attributes

CONTINUUM OF PRODUCT ATTRIBUTES

 FACTORS AFFECTING CONSUMER BUYING
BEHAVIOUR TOWARDS SERVICES
SOCIAL FACTORS CULTURAL FACTORS

Family influence Culture

Reference group influence Subculture
Roles and status Social class

CONSUMER AS
DECISION MAKER
Age & family life cycle
Beliefs and attitudes
Economic circumstances
Learning
Occupation
Personality & self concept
Psychographics
PSYCHOLOGICAL FACTORS PERSONAL FACTORS
 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