UNIT-I

SERVICES MANAGEMENT & SERVICES MARKETING

 UNIT-I Introduction to Services
Contents:
Nature & Characteristics of Services
Intangibility, Inconsistency, Inseparability and
Inventory
Search, experience and credence attributes
Classification of services, Consumer v/s Industrial
services, Goods and Services Continum, Robert
Jhonton Model of Service segmentation Strategy
Global and Indian Scenario in service sector
Service as key differentiator for manufacturing
industries
 Services Marketing
Services marketing is a specialized branch of marketing.
Services marketing emerged as a separate field of study
in the early 1980s, following the recognition that the
required different strategies compared with the
marketing of physical goods.
Services marketing typically refers to both business to
business(B2B) and business to consumer (B2C) services,
and includes marketing of services such as
telecommunication services, financial services, all types
of hospitality, tourism leisure and entertainment
services etc.
SERVICES
“Services are activities, benefits or satisfaction
which are offered for sale or provided in
connection with sale of goods”.
- The American Marketing Association

“Services are those separately identifiable

essentially intangible activities, which provide
want satisfaction when marketed to consumers
and/or industrial uses and which are not
necessarily tied to the sale of a product or another
service”. - Stanton
 Services

Services: In economics, a service is a transaction in

which no physical goods are transferred from seller to
buyer. Examples of service businesses are as under.
Airline
Courier Service
Hotel
Beauty Saloon
Advertising
Consultancy
Legal services
Medical services
Banking services
Nature & Characteristics Of Services
A service is an act or performance offered by
one party to another. They are economic
activities that create value and provide
benefits for customers at specific times and
places.
The term service is not limited to personal
services like medical services, beauty parlors,
legal services, etc.
According to the marketing experts and
management thinkers the concept of
services is a wider one. The term services
are defined in a number of ways but not a
single one is universally accepted.
 Main characteristics of service are:
• Intangibility
• Inseparability
• Heterogeneity
• Ownership
• Quality Measurement
•Nature of Demand
 Intangibility
Services are intangible we cannot touch them are not
physical objects. According to Carman, a consumer
feels that he has the right and opportunity to see,
touch, hear, smell or taste the goods before they buy
them. This is not applicable to services.
The buyer does not have any opportunity to touch
smell, and taste the services. While selling or
promoting a service one has to concentrate on the
satisfaction and benefit a consumer can derive having
spent on these services.
For example, An airline sells a flight ticket from
destination A to destination B. Here it is the matter of
consumer’s perception about the services
offered/taken than smelling it or tasting it (because
there is no such metrics).
 Inseparability
Services are generally created or supplied
simultaneously. They are inseparable.
For an e.g., the entertainment industry, health
experts and other professionals create and offer
their service at the same given time.
Services and their providers are associated
closely and thus, not separable. Donald Cowell
states ‘Goods are produced, sold and then
consumed whereas the services are sold and then
produced and consumed’. Therefore
inseparability is an important characteristic of
services which proves challenging to service
management industry.
 Heterogeneity
This character of services makes it difficult to set
a standard for any service. The quality of services
cannot be standardized. The price paid for a
service may either be too high or too low as is
seen in the case of the entertainment industry
and sports.
The same type of services cannot be sold to all
the consumers even if they pay the same price.
Consumers rate these services in different ways.
This is due to the difference in perception of
individuals at the level of providers and users.
Heterogeneity makes it difficult to establish
standards for the output of service firm.
 Ownership
In the sale of goods, after the completion of
process, the goods are transferred in the name of
the buyer and he becomes the owner of the goods.
But in the case of services, we do not find this. The
users have only an access to services. They cannot
own the service.
e.g. a consumer can use personal care services or
medical services or can use a hotel room or
swimming pool, however the ownership remains
with the providers.
 Quality Measurement

A service sector requires another tool for

measurement. We can measure it in terms of
service level. It is very difficult to quantify total
purchase. We can quantify the food served in a
hotel but the way waiter serves the customer or
the behavior of the staff cannot be ignored while
rating the total process.
Hence we can determine the level of satisfaction at
which users are satisfied. Thus the firm sells good
atmosphere convenience of customers, consistent
quality of services, etc.
 Nature of Demand

Generally, the services are fluctuating in nature.

During the peak tourist seasons there is an
abnormal increase in the demand of services.
Therefore, while identifying the salient features of
services one cannot ignore the nature of demand.
E.g. tourists go to hill stations during summer
season wherein public transport utilities are used
substantially. This indicates that flexibility is the
important feature of service.
 Difference Between Services &
Physical Goods
S. Physical Goods Services
No.
1. Tangible Intangible
2. Homogeneous Heterogeneous
3. A Thing An Activity and Process
4. Customer do not Customer participate in the
participate in the production process
production process
5. Can be kept in stock Cannot be kept in stock
6. Transfer of ownership No transfer of ownership
7. Production and distribution Production, distribution and
are separated from consumption are simultaneous
consumption process
 Service Environment
The potential customers form an impression about
the service on the basis of service environment.
The service environment represents the physical
back drop that surrounds the service.

For example, providing hygienic food is the core

service in a hotel or restaurant. Customers
expect the restaurants to be maintained clean, offer
flexible dining hours, prompt service, soft music,
Interior, exotic menu etc.
 Service Delivery & Service Quality

The Service delivery is one of the important

components of service. Service delivery is of great
importance to the customer’s overall perception
about the quality of service.
The service provider should give due consideration
to the way service is rendered to customers.
Services are created as they are consumed.
Quality plays a very import role towards the
reputation building of a service organization.
 Principles of Service Marketing
When we observe the process of selling a service we realize
how difficult it is to sell a service and how scary it is to buy
one. These are four principles of services marketing.
First Principle: The first principle of services marketing is that
the focus should not be much on marketing but on the
service itself.
The service companies spend far too much effort on marketing
or spreading the word and do not concentrate on their
primary focus, the service. The importance of marketing
shouldn't be ignored but most of the times it is either done
too quickly or the effort on marketing exceeds the
attempts made to improve the service. In both the cases
marketing will cause more harm than good. On the other
hand if the focus is primarily on constant improvement on
service then marketing efforts are cheaper, easier and
effective.
Second Principle: The second principle is facing
the reality. We should assume that our service
is not that good as it should be and this
thinking drives us to continually improve our
services. Most of the service industries are
not aware of their service problems or they
are under the illusion that their service quality
is good.
Typically most of the small industries and mid-
sized ones are finding it difficult to maintain
the adequate level of service.
Third Principle: The third principle says selling a
service is like selling a relationship.
When we are selling a service we are not selling
our expertise. This is so as the client does not
always have the expertise to evaluate our
expertise.
Instead we should focus on selling a relationship
because that is the only way it works.
When we are selling a service we are selling a
relationship.
Fourth Principle: The fourth principle lays stress on
innovation. The service industry not only needs to
deliver what the customer needs or wants but also
what it would love to have. There are at least three
stages to the maturing of a service industry. The first
stage is where the service industry strives to satisfy
the needs of the customers. The second stage
includes the process of improvement which the
industry creates in its service to meet the client's
wants and demands. This is the stage where most
industries are blinded by the illusion of fulfillment of
their goal. The third stage is they believe that they
have achieved the maximum a client can be provided
with. This is the final stage which is of greatest
importance. Very few service industries reach this
stage.
 Search, Experience & Credence Attributes
Search products or services : Customers can readily evaluate
before they purchase.
 A hotel room price, an airline schedule can all be evaluated
before a purchase is made.
 Well-informed buyers are aware of the substitutes that
exist for these types of products and thus are likely to be
more price sensitive than other buyers.
 This sensitivity, in turn, induces sellers to copy the most
popular features and benefits of these types of products.
 Price sensitivity is high with respect to products with many
substitutes, and since most buyers are aware of their
alternatives, prices are held within a competitive band.
Experience products or services: Can be evaluated only after
purchase is made.
 Such as dinner in a new restaurant
 A concert or theater performance
 a new movie, or a hairstyle.
The customer cannot pass judgment on value until after he or
she has experienced the service. These types of products
tend to be more differentiated than search products, and
buyers tend to be less price sensitive, especially if it is their
first purchase of said product.
 Product brand and reputation play an important role in
experience products, due to consistency of quality and
loyalty. For instance, when customers travel, so does brand
reputation, as with airlines, hotels, rental cars, and so forth.
Credence products or services: Cannot confidently evaluate,
even after one or more purchases. Thus, buyers tend to rely
on the reputation of the brand name, testimonials from
someone they know or respect, service quality, and price.
 Credence products and services include health care; legal,
accounting, advertising, consulting, and IT services; baldness
cures; pension.
 Credence services are more likely than other types to be
customized, making them difficult to compare to other
offerings. Because there are fewer substitutes to a customized
service and there is more risk in purchasing these types of
services.
Price sensitivity tends to be relatively low — that is, the majority
of customers purchasing credence services are relatively price
insensitive compared to search or experience goods.
 Classification of Services
There has been various attempts towards classification of
services, following is the classification scheme developed
by Christopher Lovelock and it is widely accepted.
1. Nature of the service act- Tangible & Intangible actions
2. Type of relationship (Between service organization and
customer)- Membership Relationship- Continuous
delivery of service (e.g. telephone subscription, bank a/c
service etc). Other is no formal relationship (e.g. Radio
station, public highway etc)
3. Scope of customization (On the part of service provider)-
In this services are provided in a customized way- (
Beautician work, coming at home for marriage related
readiness, handling of tuition teacher for a poor student,
retail banking account etc where lot of customized
services are given.
4. Nature of demand and supply- If demand
exceeds the present supply, it is an invitation for
another supplier to step in. (e.g. demand of
electricity in peak hours, police and fire
emergencies, Accounting and tax preparations,
week-end demand of restaurants)
5. Method of service delivery- Customer goes to
service organization (e.g. Theater, Barbershop
etc). Other is that service organization comes to
customer (e.g. pest control services, taxi etc)
 Classification (Nature of Service Act)
The service processes can be either manual or mechanized or
both.
It is possible to carry out a classification of services based on
two general dimensions such as what is being processed?,
whether is it a person or an object, and how it is being
processed? In other words, what is the nature of the
process (tangible or intangible actions).
1) Classification of service based on tangible action
Wherever people or products are involved directly, the service
classification can be done based on tangibility.
a) Services for people – Like Health care, restaurants and
saloons, where the service is delivered by people to people.
b) Services for goods – Transportation of goods from one city
to other, repair and maintenance of computers etc. In this
services are given by people for objects or goods.
2. Classification of services based on intangibility
There are objects in this world which cannot be tangibly
quantified. These services are classified on the basis of
intangibility.
a) Services directed at people’s mind – Services sold through
influencing the creativity of humans are classified on the
basis of intangibility. (e.g. education)
b) Services directed at intangible assets – Banking, legal
services, and insurance services are some of the services
most difficult to price and quantify.
The most intangible form of service output is represented by
information processing. The customer’s involvement in this
type of service is not required. Generally, customers have a
personal desire to meet face to face but there is no actual
need in terms of the operational process.
 Consumer V/s Industrial Services
• Consumer Service is service provided to the final
buyer. A worker in a grocery store
provides consumer service to its customer/client.
• Industrial Service is service provided from one
business to another. A worker in a pasta packaging
plant would provide industrial service to the
manager of the grocery store.
Individual consumer is an individual and household
who buy goods and services for their personal use
while the industrial is for building materials to
supply further or for any other use..
 Goods and Service Continuum
The division of consumables into services is a simplification:
these are not discrete categories. Most business
theorist see a continuum with pure service at one
endpoint and pure commodity goods at the other. Most
of the products fall between these two extremes.
For example, a restaurant provides a physical good (ready &
prepared food) , but also provides services in the form of
ambience, the setting and clearing of the table, etc.
Although some utilities, such as electricity and
communication service providers, exclusively provide
services, other utilities deliver physical goods, such
as water utilities.
For govt. work and public sector contracting electricity is
defined among goods.
Standing Apart from the Competition

A business must set itself apart from its

competition. To be successful it must
identify and promote itself as the best
provider of attributes that are
important to target customers .

George S. Day
Robert Johnton Model of Service Segmentation
Strategy
 Focus Underlies for the Competitive
Advantages
• Intensifying competition makes it important to
differentiate products
• In mature market, only way to grow may be to take
a share from competitors
• Must be selective in targeting customers
• Rather than compete in an entire market, firm must
focus efforts on customers it can serve best
• Emphasize competitive advantage on those
attributes that will be valued by customers in target
segment(s)
 Risk and Opportunities of a Fully Focused
Strategies
• Opportunities
– Developing recognized expertise in a well-defined niche
may provide protection against would-be competitors
– Allows firms to charge premium prices
• Risks
– Market may be too small to generate needed volume of
business
– Demand for a service may be displaced by generic
competition from alternative products
– Purchasers in chosen segment may be susceptible to
economic downturn
 Market Segmentation Forms the
Basis for Focused Strategies
• Firms vary widely in ability to serve different types of customers
– Adopt strategy of market segmentation, identifying
those parts of market that can be served best
– A market segment is composed of a group of buyers
sharing common:
• Characteristics
• Needs
• Purchasing behavior
• Consumption patterns
 Market and Micro Segmentation
 Creation of customer databases and sophisticated analytical software
enable firms to adopt:
―Micro segmentation strategies target small groups of
customers sharing certain relevant characteristics at a
specific point in time
 Identifying and Selecting
Target Segments
• A target segment is one that a firm has selected
from among those in the broader market and may
be defined on the basis of multiple variables
• Must analyze market to determine which segments
offer better opportunities
• Target segments should be selected with reference
to
– Firm’s ability to match or exceed competing offerings
directed at the same segment
– Not just profit potential
• Some “underserved” segments can be huge,
especially poor consumers in emerging economies
 Developing Right Service Concept for a
Specific Segment
• Use research to identify and prioritize which
attributes of a given service are important to
specific market segments
• Individuals may set different priorities according to:
– Purpose of using the service
– Who makes decision
– Timing of use
– Whether service is used alone or with a group
– Composition of that group
 Four Principles of Positioning Strategy
• Must establish position for firm or product in
minds of customers
• Position should be distinctive, providing one
simple, consistent message
• Position must set firm/product apart from
competitors
• A company cannot be all things to all people—must
focus its efforts
By Jack Trout
 Principles of Positioning
• What does our firm currently stand for in the
minds of current and prospective customers?
• What customers do we serve now, and which
ones would we like to target in the future?
• What is value proposition and target segment
for each of our current service offerings?
• How do our service offerings differ from
competitor’s?
• What changes must we make to our offerings
to strengthen our competitive position?
 The 4 I’s of Service Marketing
Intangibility: Unlike products, services cannot be held, touched, or
seen before the purchase decision therefore, they should be made
tangible to a certain extent. Marketers should “tangibilize the
intangible” to communicate service nature and quality.
Inconsistency: Service quality is often inconsistent. This is because
service personnel have different capabilities, which vary in
performance from day to day. This problem of inconsistency in
service quality can be reduced through standardization, training
and mechanization.
Inseparability: Services are produced and consumed simultaneously.
Consumers cannot not separate the deliverer of the service from
the service itself. Interaction between consumer and the service
provider varies based on whether consumer must be physically
present to receive the service.
Inventory: No inventory can be maintained for services. When the
service is available but there is no demand, cost rises as, cost of
paying the people and overhead remains constant.
 The Three R’s of Service Quality
• Reliability
Whether product or service, the foundation of any strong brand is
reliability. The customer must know that when they interact with the
service offering that they will receive reliable service. That can only be
controlled through training, quality standards, and measurement. A
service-based brand can only survive based on a reliable offering.
• Responsiveness
A service offering necessarily requires a back-and-forth between the
customer and the supplier. The supplier must ensure that the
customer’s expectations for responsiveness are met, or the customer
will start to look for alternatives. A service-based brand doesn’t need
to be the fastest, but it must be consistent.
• Respect
Once a service offering is consistently reliable and responsive, it is the
‘respect’ that separates the premium service offerings from the rest of
the field. A customer who feels respected will be more satisfied and
loyal.
 Need for Services Marketing
The growing consumer demand for more services
has brought forth an accelerated effort on the
part of marketer to satisfy these consumer
needs and to broaden their own customer base
and add to revenues and profitability.
Nearly half of the consumer service budget is
related to utilities and other house hold
operations, such expenditures have been
growing rapidly in recent years reflecting a
substantial growth which has been expanding at
a faster rate than the nation’s total population.
 Challenges faced by the Service Industry
It is a challenging task to manage a service or product
industry. These challenges however are different and
unique for each industry. Some of the points related to it
are as under.
1. Services are intangible and so customers cannot see or
hold them before they buy it. Buyers are therefore
uncertain about the quality of service and feel they are
taking a risk.
2. Defining and improving quality in the service industry is a
major challenge. Unlike products very often services are
produced and consumed simultaneously. As a result
service quality management faces challenges. During
service production the customer is right in front. To
guarantee customer satisfaction in this scenario is a major
challenge.
3. The customer first needs to develop trust in the
service organization before he buys their services.
4. Service industry faces competition not only from
fellow service industry but also from their clients
who often question themselves whether or not they
should engage a service at all. (This is related to
something of new in the service delivery & style)
5. Most of the product companies have dedicated sales
staff while in the service industry the service
deliverers often do the selling. Coordinating
marketing, operations and human resource efforts is
a tedious task.
6. While testing new services is a constant challenge
communicating about these services simultaneously
is also not easy.
7. Setting prices does not come easily for service
industry.
8. Standardization versus personalization is another
major issue the service industry has to face because
you need an expertise for it to deliver customized
services successfully. Also there is one advantage in
case of personalization/customization, means we
can develop a good relationship with customers
which ultimately helps in retaining him and also the
WOM for others which leads to revenue generation
so the profitability. Customization gives you an
opportunity to to get premium service charges.
 Indian Scenario of Service Sector
The services sector is contributing significantly in India’s GDP,
and also attracting foreign investment flows, contributing
significantly to exports as well as provided large-scale
employment.
India’s services sector covers a wide variety of activities such as
trade, hotel and restaurants, transport, storage and
communication, financing, insurance, real estate, business
services, community, social and personal services, and services
associated with construction.
Market Size: The services sector is the key driver of India’s
economic growth. The sector is estimated to contribute around
54.0 per cent of India’s Gross Value Added in 2017-18 and
employed 28.6 per cent of the total population. Net Services
exports from India grew 14.98 per cent year-on-year to US$
77,562.89 million in 2017-18.
Investments: The top 10 categories of Indian services sector
attracted FDI equity inflows in the period April 2000-December
2017, amounting to about US$ 22,095.51 billion according to the
Department of Industrial Policy and Promotion (DIPP).
Some of the developments and major investments by companies
in the services sector in the recent past are as follows:
 The domestic and foreign logistic companies are optimistic
about prospects in the logistics sector in India, and are actively
making investments plans to improve earnings and streamline
operations.
 Leisure and business travel and tourism spending are expected
to increase to Rs. 14,127.1 billion (US$ 216.9 billion) and Rs
806.4 billion (US$ 12.4 billion) in 2018, respectively.
 Market share of private banks in advances is expected to
increase from 27.7 per cent in 2017-18 to nearly 35 per cent in
2019-20.^
Government Initiatives: The Government of India recognizes the
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.
 The Government of India has adopted a few initiatives in the recent
past. Some of these are as follows:
 Under the Mid-Term Review of Foreign Trade Policy (2015-20), the
Central Government increased incentives provided under Services
Exports from India Scheme (SEIS) by two per cent.
 Government of India is working to remove many trade barriers to
services and tabled a draft legal text on Trade Facilitation in Services
to the WTO in 2017.
Road Ahead: Services sector growth is governed by both
domestic and global factors. The Indian facilities
management market is expected to grow at 17 per cent
CAGR between 2015 and 2020 and surpass the US$19
billion mark supported by booming real estate, retail, and
hospitality sectors.
 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.
 Reasons for the Growth of Service Sector in India
The growth of service industry is the result of
combination of several reasons and some of
them are explained below:
1. Increasing affluence(wealth): there has been
an increase in the demand for those services,
which the customers used to perform by
themselves. If we talk about 30 years back,
generally having a driver for car means a very
rich person to afford the same.
For example, service provided by the gardener,
servants, car driver etc.
2. Greater life expectancy(hope): With increase in the
average life of the people, there has been an increase in
the service which is related to field of health care, for
example medical services, pathology laboratory, nursing
homes. Health care services etc.
3. Greater complexity of the product: (Complicated)
With the growing complexity of the product, there has
been an increase in the services which are indirectly
supporting the maintenance of these complex products.
For example Air-conditioner, car, computer, and other
complex products require service every yearly of every
half yearly.
4. More leisure(free time) time: This factor has
lead to an increase in those services which are
related to entertainment, because of increase in
leisure time in today's people life. For example
tourism industry has grown because of more leisure
time available to the people.
5. Higher percentage of working women: With the
passage of the time, there has been an increase in
the working women. This has indirectly leaded to
increase in the growth in the services such as,
domestic servants, baby sittings, purchase of food
items etc.
6. Increasing complexity of life: This has lead to an
increase in the services of marriage bureau, legal
service, income tax consultants, placement services,
etc.
7. Increasing number of new products: There is
always a possibility of new product and so the
possibility of services accordingly. are certain
products which, if invented will lead to growth in
the service sector.
Computer being the invention of the 21st century
has lead to software industry which is totally a
service industry.
 Global Scenario in Service Sector
• The tertiary sector of the economy (also known as
the service sector or the service industry) is one of
the three economic sectors, the others being the
secondary sector (approximately the same as
manufacturing) and the primary sector (agriculture,
fishing, and extraction such as mining).
• For the last 100 years, there has been a substantial
shift from the primary and secondary sectors to the
tertiary sector in industrialized countries. This shift is
called tertiarization. The tertiary sector is now the
largest sector of the economy in the world, and is
also the fastest-growing sector.
In the United States 70 percent of the workforce works
in the service sector; in Japan, 60 percent, and in
Taiwan, 50 percent. Many of them are in the
professional category. They are earning as much as
manufacturing workers, and often more.
According to the U.S. Department of Commerce, during
the last half of the 20th century, the service sector
became the largest and fastest-growing part of the
U.S. economy. During the first half of the century, the
service sector represented about 60 per cent of the
economy, but by the end of the 20th century, it
represented about 80 per cent. This has been a
significant shift and an ongoing transition from an
agrarian (farming) economy to manufacturing, and,
ultimately, to the service economy that we see today.
 WORLD SCENARIO: Facts and Figures
• As economy shifts from developing to developed stage, they
will show more and more shift toward services.
• Today, the fastest growing segments of the US economy are
services.
• The US balance of trade in goods has remained in the red for
many years, but here has been a trade surplus in services.
• Today service sector dominates the economics of many
developed nations. As countries develop the role of
agriculture in the economy declines and that of services
increase.(China has 44.6% GDP from service, 45.5% from
industry, and 10% from agriculture).
• During recession it has been seen that service output declines
less than industrial output – the service employment is less
sensitive to business cycle fluctuation.
• Globalization as strategy for service firm is becoming more
important.
Source: Website of International Chamber for Service Industry
 Service Differentiation
Differentiation is a basic business and marketing strategy,
by which a company focuses on distinct differences in
its offering to customers as the basis for establishing a
competitive advantage. For service-oriented
businesses, you can focus on quality differentiation as a
strategy to attract and retain core customers. To
succeed in this approach, you must typically distinguish
your business in a variety of service components.
1. Service performance- High quality service
2. Service experience- Improve the down time
3. Service resolution- Resolve issues
4. Service challenge- Human work
 Services as Key Differentiator for Manufacturing
Industries
Manufacturing companies are redirecting their efforts
towards customer centricity and innovativeness, but also
from goods to services. Instead of only innovating
products, companies are investing in service
differentiation. Consequently, instead of services being
add-ons to the product, they become the center of the
total offering, with products as add-ons to the services.
Various terms describe this service differentiation in
manufacturing firms, including service business
development, servizitation, service infusion, high-value
solutions, and transition from products to services (Davies,
2004; Gustafsson et al., 2010; Oliva and Kallenberg, 2003;
Vandermerwe and Rada, 1988).
A common rationale involves using service differentiation to
take advantage of strategic, financial, and marketing
opportunities. The fact that services are less visible and
more labor-dependent makes them a strategic
opportunity and a sustainable source of competitive
advantage (Heskett et al., 1997). Services lead to co-
creation of value based on the competencies of the
company and the customer (Matthyssens et al., 2006;
Vargo and Lusch, 2008), which leads to resources that are
unique and hard to imitate (Wernerfelt, 1984). Financial
opportunities include additional service 3 revenues
throughout the product lifecycle (Potts, 1988; Wise and
Baumgartner, 1999). Marketing opportunities involve
using services to augment the product offering and
increasing the quality of the customer interaction
(Mathieu, 2001).
Reasons for Growth of Service Sector
1. Demographic Changes
2. Economic Changes
3. Social changes
4. Legal Changes
5. Technological Changes
Significance of Services Marketing
1. Generation of employment opportunities
2. Optimum utilization of resources
3. Capital formation
4. Increased standard of living
5. Use of environment-friendly technology
 1. Generation of employment opportunities

The components of the service sector are wide and

varied. For example, the service sector includes
personal care services, education services,
medicare services, communication services,
tourism services, hospitality services, banking
services, insurance services, transportation
services, consultancy services etc.
The organised and systematic development of
the service sector would create enormous
employment opportunities.
 2. Optimum Utilisation of Resources

India is bestowed with rich resources. Particularly,

the human resources available in India favour
the growth of the service sector.
While the labour content in most manufacturing
activities is dropping steadily with use of
technology, the labour content in the service sector
is comparitively high.
As India is rich in human resources, service
sector can grow steadily. Moreover, service sector
offers excellent export opportunities too.
 3. Capital Formation

There are indications that Services will grow more

rapidly in the near future. Economic, social and
political factors signal an expansion of the
service sector.
Investments and job generations are far greater
in the service sector compared to manufacturing.
For the development of a nation, the flow of capital
should be directed towards the most productive
uses.
If investments are made in the service sector, it
will contribute to the nation-building process.
 4. Increasing the Standard of Living

The standard of living of the people in any country

would be decided on the basis of quality and
standard of products consumed or services availed
in the day-to-day living.
Any development is transparent only when the
living conditions of the masses improve. When
compared with developed countries, the standard
of living in India is far from satisfactory.
Standard of living cannot be improved by offering
more opportunities for earnings.
 5. Use of Environment friendly Technology

Now-a-days, almost all services are found

technology-driven. Developed countries are
making full use of latest technology while
rendering services. Technologies used by service
generating organisations such banks, insurance
companies, tourism, hotel services, communication
services and education services are not
detrimental in any way to the environment.
 Service Marketing Triangle
The company, its employees and its customers
form the three integral roles in the service
marketing triad. The business has products and
services to offer and promote to customers. It
uses external marketing, such as advertising and
public relations, to attract customers. Employees
interact with customers during sales and service
processes. The more positively employees view
their roles within the company, the more
effectively they will take care of the company's
customers.
Internal marketing refers to the way a company
communicates with employees. It includes
sharing of important news by company leaders
and effective support of employees as they do
their jobs.
External marketing includes all promotional efforts
aimed at customers to promote the benefits of
the company and its products and services.
Interactive marketing includes direct exchanges
between employees and customers whom they
share product or service information with to
induce purchases. At the center of the triad is
technology, such as phones, computers and
mobile devices, which are used in implementing
these marketing elements.
 Importance of Innovation in Services
Service innovation” has become a term referring to
innovation taking place in the various contexts of
services, including the introduction of new services or
incremental improvements of existing services.
 New and improved services can also be provided by non-
services sectors, such as by manufacturing firms that aim
at enlarging their supply portfolio with value adding
services. Similarly, service innovation is intrinsically
(internally) different from a “product”, as it usually lacks
the tangible nature of product innovations. Services may
be highly tailored according to the client/customer needs,
and include many different stakeholders.
 By improving innovation a service organization can create a
large loyal customer base and so the good corporate
image.
 Service Marketing Environment in India
The environment of India has undergone dramatic changes in
last two decades. From the controlled environment the
country has moved towards autonomy in several service
sector.
Telecom Regulatory Authority of India (TRAI)- Telecom
related issues and concerns in India.
Central Power Research Institute (CPRI)- The main objective
of setting up the Institute was to serve as a National
Laboratory for undertaking applied research in electric
power engineering.
National Power Training Institute (NPTI)- National Power
Training Institute (NPTI) has been set up by Government of
India to function as the National Apex Body for the Human
Resources Development of Power Sector personnel in
India.
IITs and IIMs are all autonomous bodies.
 Ethics in Services Marketing
With rapid growth in the industry, there has been
various ethical issues and concern being raised
about the service industry. Some of them are as
under.
1. Aggressive promotion through telemarketing or
personal selling (In personal selling person does
not know where to stop)
2. Invasion of privacy (DND, do not disturb)-
Permission
3. Misleading claims backed by poor service
performance- for Ex. tour operator claim a
certain price but actually it is not.
 Questions based on syllabus covered
1. Differentiate between goods and services.
2. Explain the reasons for growth in service sector.
3. Explain the need of service marketing as separate subject.
4. Discuss the role of service sector in Indian economy.
5. Explain the characteristics features of services.
6. Explain 4 I’s of services.
7. Explain 3 R’s of Services.
8. What is globalization of services?
9. Discuss the major reasons for the growth of global
services.
10. What is your understanding about customization of
services? Explain.
11. Explain the classification of services on the basis of service
action.