Chapter 1

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Field of Services

Services Marketing: Text and Cases, 2e Author: Harsh Verma

 Agenda

• Understand role played by services in different economies

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• Appreciate transformation of economies

• Facts responsible for growth in services

• Why quality in services is poor?

• Why marketing inevitable for services?

• Search for marketing know-how for services

Services Marketing: Text and Cases, 2e Author: Harsh Verma

 Service Sector

• Economies becoming service dominated—Hyper-competition

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• Service dominated economies.
Example: US, UK, Japan, etc

• Service sector—Economy driver

• Service dominance followed by manufacturing dominance

• Best in services
Examples: American Express, Citibank, Walt Disney,
McDonald’s ,Marriott Hotels, Microsoft, FedEx, Wal-Mart,
etc
Services Marketing: Text and Cases, 2e Author: Harsh Verma
 Service Sector Examples

• Entertainment

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• Banking

• Health

• Education

• Communication

• Transportation

• Legal advice

• Restaurant

Services Marketing: Text and Cases, 2e Author: Harsh Verma

 Clark–Fisher Hypothesis

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As nations become industrialized, shift of employment
from one sector to other is inevitable

This is due to sector productivity

As productivity increases in one sector, the labour force

shifts to that sector

Services Marketing: Text and Cases, 2e Author: Harsh Verma

 Economic Activity Classification

• Primary/Extractive
Example: Agriculture, mining, fishing, forestry

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• Secondary/Goods purchasing
Example: Manufacturing, processing

• Tertiary

• Domestic services
Example: Barber, beauty salon, repairs

• Quaternary services
Example: Finance, retailing, government

• Quinary Services
Example: Education, health, recreation
Services Marketing: Text and Cases, 2e Author: Harsh Verma
 Economic Activity Classification

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Primary/Extractive
Example: Agriculture, mining, fishing and forestry

Secondary/Goods purchasing
Example: Manufacturing, processing

Tertiary
Domestic services. Example: Barber, beauty salon, repairs
Quaternary services. Example: Finance, retailing, government
Quinary services. Example: Education, health, recreation

Services Marketing: Text and Cases, 2e Author: Harsh Verma

 Indian Economy—How to Achieve
Service Dominance?

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• Non-linear path

• Boundaries in business context becoming vague

• Countries pro-free trade

• Old economic ideologies diminishing

• Services development along with industrial development

Services Marketing: Text and Cases, 2e Author: Harsh Verma

 Service Consumption Behaviour

• Changes in composition of consumption basket

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• With increase in income, spending shifts towards services
• Consumption in travel, education, entertainment, repairs and
personal care taking leap
• Jet Airways and Sahara pro-free mark in aviation industry
• Apollo and Max—mark in healthcare
• Entertainment industry: Family owned business to world
class cineplexes
• Indian service sector—more than half of Indian GDP

Services Marketing: Text and Cases, 2e Author: Harsh Verma

 Economic Development: Different
Waves

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Services Marketing: Text and Cases, 2e Author: Harsh Verma
 Comparison Of Tools

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Tools Used in Different Ages

Agricultural age Industrial age Information age

Started in mid- Started in early
nineteenth century twentieth century
Lasted till 1850’s Manufacturing was Information has lot of
Agriculture was primary income source value
primary income source Eg: Steam engine, Eg: Telescope,
Eg: Plough, treadmill, laser, cement, satellite, radio, fax,
bullock cart assembly line Internet, iPod

Services Marketing: Text and Cases, 2e Author: Harsh Verma

 Growth of Services
• As family income increases, consumption of
goods decrease and services increase
Increasing levels

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• Also, as services become costly they are
of income substituted by quality durables. Example:
Services by maids

• People living in close proximity-

opportunity for services development
Urbanization • Urban lifestyle services: Laundry,
education, fitness, restaurants, etc

• Roles of men and women: Fading

Women in
boundary
workforce • Opportunity cost for women increasing

Services Marketing: Text and Cases, 2e Author: Harsh Verma

 Growth of Services

• Increased life expectancy: Great

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Demographic opportunity
Shifts • Example: Entertainment, recreation,
financial planning and diagnostic services

• Unlike manufacturing, no environmental

Concern for damage
Environment • Non-polluting environment: A positive
impetus for growth

• Spending on social and defence services

increasing
Government • Developing sectors: Telecommunication,
infrastructure, etc.

Services Marketing: Text and Cases, 2e Author: Harsh Verma

 Growth of Services
• Services comprise of goods-Services
giving boost to manufacturing
Industrialization

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• Support services get boost: Advertising,
logistics, retailing, event management,
etc.

• Worker burnout: Scope for services.

Example: Fitness, de-stressors,
Competitive
energizers, etc.
Pressures • National specialization and international
specialization

• Depth of in services knowledge becoming

more demanding
National • Core activities undertaken, support
Specialization activities outsourced. Example: Luggage
handling outsourced by airlines

Services Marketing: Text and Cases, 2e Author: Harsh Verma

 Growth of Services

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Services Marketing: Text and Cases, 2e Author: Harsh Verma
 Growth of Services

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Services Marketing: Text and Cases, 2e Author: Harsh Verma
 Growth of Services

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Services Marketing: Text and Cases, 2e Author: Harsh Verma
 State of Services

• Movement of world towards free trade

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• Transfer of technology

• Quality in services is way behind manufacturing

• Service quality: Pervasive across developed and developing

world

• Atleast choices available in selection of service provider

• Marketing concept gearing importance in service industry

Services Marketing: Text and Cases, 2e Author: Harsh Verma

 Common Bugs in Services

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• Improper portions, inordinate waiting
Restaurant and • Not being directed, incorrect billing
Fine Dining • Smelly environment, un-sanitized linen

• Call drop, lack of transparency

Mobile • Complicated processes, customer service
Communication • Poor coverage, excess billing

• Inadequate infrastructure, teaching

Education methodology, big class sizes
• Exploitative environment, hidden charges

Services Marketing: Text and Cases, 2e Author: Harsh Verma

 Common Bugs in Services

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• Unexplained delays, indifferent staff
Air • Punctuality, unclear announcements
Transportation • Unwillingness to help, false promises

• Inadequate parking, billing errors

Retailing • Long queues, poorly informed staff

• Unlabelled designations, delays in cheque

Banking processing
• Poor IT know-how, harsh attitude

Services Marketing: Text and Cases, 2e Author: Harsh Verma

 Reasons for Service Failure
• Ideology of conformance to specifications

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• Delay in realizing importance of marketing

• Not much competition as in case of goods

• Weak local competition—nonetheless same quality

• Failing to make it customer centric i.e. outside-in

• Adoption of goods manufacturing concepts

• Not much literature available on service marketing

Services Marketing: Text and Cases, 2e Author: Harsh Verma

 Need for Marketing

• Environment rife with opportunities and threats

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• Marketing too much associated with FMCG sector

• Foreign firms venturing into India

• Outside-in logic not approached, unless loss incurred

• Environment forcing services to become customer centric.

Example:
Sales decline, slow growth, changes in buying patterns,
increasing competition, increasing marketing expenditure

Services Marketing: Text and Cases, 2e Author: Harsh Verma

 Paradigm Shift
• Pre-liberalization: Services was a collective failure. No escape
route for customer dissatisfaction. Customer churn did not

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effect performance

• Services improvement through quality improvement, price

reduction, promotion and advertising

• Service marketing underwent change: New pure service

sectors emerged. Examples: Event management, insurance,
tourism, wealth management. Goods firms had to augment
their offerings to include services for competitive advantage

Services Marketing: Text and Cases, 2e Author: Harsh Verma

 Paradigm Shift

• Most economies of the world are undergoing a subtle

transformation

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• Service sector is emerging as the top value creator

• This transformation is unleashing both opportunities and

threats

• The organizations that ignore or do not pay attention to

change face the risk of extinction

• The challenge is to embrace marketing, customer

orientation and innovation

Services Marketing: Text and Cases, 2e Author: Harsh Verma