Marketing of Services
Unit-1
EMERGENCE OF SERVICE ECONOMY
The Service Economy is a relatively new coinage arising out of the popularity of
the service sector. The service sector has gained a lot of importance in the world
economy. Most of the developed countries are earning millions from the service
sector alone. In US, the service sector accounts for a greater percentage of GDP
than it used to a couple of years back. The term Service Economy also known as
Functional Economy is used to refer to the relative significance of service
attached to a product offered by a company. In today’s economy every product has
a service value attached to it. The old dichotomy between product and services has
been reduced and a service-product continuum has been established. In
management this phenomenon is referred to as the Servitization of Products. When
a company proceeds from maximizing its sales towards customer satisfaction it
puts emphasis on the aspect of service. It helps the company to enhance its
goodwill in the market.
The size of the service sector is increasing in virtually all countries around the
world. In emerging economies, the service output is growing rapidly and often
represents at least half of the GDP. Thus, Service economy is growing. As a
national economy develops, the relative share of employment between agriculture,
industry (including manufacturing and mining).The service economy in developing
countries like India is mostly concentrated in financial services,
health, and education.
Advantages of the Service Economy
The concept of service economy will eventually give rise to a decentralized means
of producing skilled jobs.
 The individual enterprises will receive the competitive advantage in entering
open markets while the big shots remain engrossed in selling products.
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Product-life extension is a scheme that will reduce the material and
energy consumption required to satisfy the needs of the consumers. It will
enhance the productivity per unit.
The enhancement in resource productivity is eventually transformed into
competency and profitability.
IBM is an unique example. In spite of being a manufacturing company it tends
to call itself a services company. This has been the scenario since it realized that
the price elasticity of demand for business solutions is less elastic than for
hardware. The company now benefits from the revenue of the elongated
contracts rather than receiving payment in a single mode
FACTORS CONTRIBUTING TO THE GROWTH OF SERVICE SECTOR
1. GOVERNMENT POLICIES: It is Govt. which makes mandatory for price
levels, distribution strategies, defining procedure attributes. Another important
action taken by the Government’s “Privatization” means the policy of transform
companies.
The transformation of such operations like telecoms, airlines has led to
restructuring cost cutting and more market focused.
PROS OF PRIVATIZATION:
 Increase the efficiency
 Increase in profits
New change will require services firm to change their marketing strategy,
operational procedures, and HR policies.
2. SOCIAL CHANGES: Now a day there is a drastic change, two members are
working, which requires to hire individuals to perform tasks that used to be
performed by a house hold member.
E.g. Child care, Laundry, Food preparation
Combinations of changing life styles like:Higher income, declining prices for many high technology products –made for
people to buy computers, Mobile phone etc.
3. BUSINESS TRENDS: Many professional associations have been forced by
Govt. to remove long-standing bars on adv and promotional activities. Franchising
has become wider spread in many service industries. Licensing of independent
entrepreneurs to produce and sell a branded service according to tightly specified
procedures.
4. ADVANCES IN IT: Changes come from the integration of computers and telecommunication.More powerful software enables firm to create databases that
combine information about customers with details of all their transaction, so that
they can be used to predict new trends, segment the market, new marketing
opportunities. The creation of wireless networks and transfer of electronic
equipments such as cell phones to lap tops and scanners, to allow sales and customer
service personnel to keep in touch.
5. INTERNATIONALISATION AND GLOBALIZATION: A strategy of
international expansion may be driven by a sector for new markets or by the need to
respond to existing customers who are traveling abroad in greater numbers. When
companies set up operations in other countries they often prefer to deal with just a
few international suppliers rather than numerous local firms. The net effect is to
increase competition and to encourage the transfer of innovation in both products
and processes from country to country.
Managerial challenges of Service sector/service business/ Service Company
Service operations managers face many hurdles daily. They must ensure that the
service is delivered according to the agreed-upon standards while meeting the
customer’s needs. Additionally, they need to motivate employees to provide
excellent service and meet targets. They also need to monitor and improve the
quality of the service continuously.
Some of the challenges faced by service operations managers include:
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Interacting with various departments that are frequently not in the office
Ensuring that all parties have easy access to essential information and data
Providing feedback and updates in real-time
Capturing and reporting on metrics around the teams they support
Creating long-term, efficient working procedures to improve performance