Dr.Nishikant Jha [coordinator]
“Where there is a will there is a way”
I.Sci, D.C.A, D.C.P;
B.Com, M.Com;
I.C.W.A.
P.G.D.B.M.(MBA)
NAT
Ph.D.
Pursuing D.Lit.
Professor
An Author
Coordinator
Ph.D.Guide
1
“An All-rounder”
Guidance Lecture on
Service Sector Management
T.Y.B.M.S. {5th Semester}
PRESENTATION BY:
•Dr. Nishikant Jha
Introduction to Services
Most organisations provide a service of some sort or other. For
organisations such as Banking, Insurance, Hospitals, Tourism,
Airlines, Infrastructure , Education, etc. service represents a major part
of what they have to offer. They are known as service organisations.
Others who are in manufacture of products service is of lesser
importance albeit significant importance. There are particular
problems in services industries namely – tangibility, inseparability,
variability, and perishability.
Put in most simple terms services are deeds, processes and
performances. Services include all economic activities whose output is
not a physical product or construction is generally consumed at the
time it is produced and provides added value in forms that are
essentially intangible concerns of its first purchases. It encompasses a
wide range of industries. [Page No. 1]
Differences between
Sr.
Physical Goods
1
Tangible
2.
Homogenous
3.
4.
Production & Distribution ≠
Consumption
A thing
5.
Core Value Product In Factory
6.
7.
Customer does not participate in
production
Can be STOCKED
8.
Transfer of OWNERSHIP
Services
Intangible
Heterogeneous
Production, Distribution &
Consumption are simultaneous.
An activity or process
Core Value Product In Interactions.
Customer actively participates in
production
Cannot be STOCKED
No Transfer of OWNERSHIP
6
Understanding Services

Activities or benefits that can be offered and are essentially INTANGIBLE.

They do not result into any ownership of anything.

They are activities

Intangibles capable of providing satisfaction

They may be non economic and voluntary.

They provide valuable benefits.

They are independent to physical product.

Requires Customer PARTICIPATION
7
A Goods-Service Continuum /
Tangibility Spectrum
8
MYTHS





Services sector thrives at the expense of other
sectors.
Services sector is labour intensive.
Services industries are “Cottage and Low
Paying Industries”.
People require products before service.
In service sector services are only offered by
the government sector.
9
How Important is the Service Sector in Our Economy?

The size of the service sector is increasing in almost all
economies around the world

Services make up the bulk of today’s economy and also
account for most of the growth in new jobs

Even in emerging economies, service output is growing
rapidly and often accounts for half or more of GDP [55%
in 2007 fm 18% in 1950s]

Jobs range from high-paid professionals and technicians
to minimum-wage positions

Service organizations can be any size –
from huge global corporations to local
[Page No. 8]
Changing Structure of Employment as Economic Development Evolves
Agriculture
Services
Industry
Time, per Capita Income
Source: IMF, 2010
Internal Services

Service elements within an
organization that facilitate creation
of – or add value to – its final
output

Includes:
– Accounting and payroll
–
–
–
–
–

administration
Recruitment and training
Legal services
Transportation
Catering and food services
Cleaning and landscaping
Increasingly, these services are
being outsourced [Page No. 36]
Classification


It lays importance in the types of resources to
be used & how to manage the process.
It emphasizes the analysis of nature of service
operation.
GOVERNMENT
For Profit
Public Sector
Non- Profit Police, Fire Dept.,
Postal
NON-GOVERNMENT
Banks, Hotels, Airlines
Old Age Homes, Charities
13
Classification ….contd.….
A. End-user
 Consumer: hairdressing, personal finance, packaged holidays.
 Business to business: advertising agencies, printing, accountancy, consultancy.
 Industrial: plant maintenance and repair, work-wear and hygiene, installation, project
management.
B. Service tangibility
 Highly tangible: vending machines, telecommunications.
 Service linked to tangible goods: domestic appliance repair, car service.
 Highly intangible: psychotherapy, consultancy, legal services.
C. Contact
 High contact (People-based services): education, dental care, restaurants, medical
services.
 Low contact (Equipment- based services ): automatic car wash, launderette, vending
machine, cinema.
14
Classification ….contd.….
D. Expertise


Professional: medical services, legal services, accountancy, tutoring.
Non-professional: baby sitting, care-taking, casual labor.
E. Profit orientation


Not-for-profit: NGO’s, charities, public sector leisure facilities.
Commercial: banks, airlines, tour operators, hotel and catering services.
F. Service Provided






Producer services (Intermediate markets) / Financial Services: Banking, insurance, leasing
Shipping and Distribution: Ocean, rail / trucking, air-freight, wholesaling, warehousing, distribution
Professional and Technical: Technical licensing and sales engineering design services, architectural design,
construction management and contracting, other management services, legal services, accounting
Other Intermediate Services: Computer, data processing, communication services (including software),
franchising, advertising, other (commercial real estate, business travel, security, postal services, contract
maintenance, etc)
Consumer Services (Final Markets to Private Citizens): Retailing health care travel, recreation, entertainment
education
Other social services, including Government Other personal services (restaurants, home repair, laundry, etc
15
Major Trends in Service Sector





Government Policies (e.g., regulations, trade agreements)
Social Changes (e.g., affluence, lack of time, desire for
experiences)
Business Trends
– Manufacturers offer service
– Growth of chains and franchising
– Pressures to improve productivity and quality
– More strategic alliances
– Marketing emphasis by nonprofits
– Innovative hiring practices
Advances in IT (e.g., speed, digitization,
wireless, Internet)
Internationalization (travel, transnational
companies) [Page No. 8]
Defining the Essence of a Service

An act or performance offered by one party to
another

An economic activity that does not result in
ownership

A process that creates benefits by facilitating a
desired change in:
– customers themselves
– physical possessions
– intangible assets [Page No. 19]
Characteristics of services:








Intangibility
Perish-ability
Inseparability
Heterogeneity
Ownership
Simultaneity
Quality Measurement
Fluctuating Demand
18
Distinguishing Characteristics of Services

Customers do not obtain ownership of services

Intangible elements dominate value creation

Greater involvement of customers in production process

Other people may form part of product experience

Greater variability in operational inputs and outputs

Many services are difficult for customers to evaluate

Service products are ephemeral and cannot be
inventoried

Time factor is more important--speed may be key

Delivery systems include electronic and physical
channels [Page No. 19]
Managing Services Requires Collaboration between Marketing, Operations, and HR
Functions
Operations
Management
Marketing
Management
Customers
Human Resource
Management
Key Elements in Service Marketing
The service marketing-mix involves analysing the 7 Ps of marketing involving, Product,
Price, Place, Promotion, Physical Evidence, Process and People. [Page No. 53,57]
PRODUCT IN SERVICES
A ‘product’ can be defined as an idea, a service, or a good that involves a mix of tangible
and intangible elements, which aim to satisfy consumers. It is traded for money or any
other trading unit which has some value attached to it. Why doesn’t a customer hesitate
to pay a higher price for a McDonald’s burger when compared to a burger at a roadside
bakery? Or why does a customer pay high fares and travel on British Airways when he
can travel at cheaper rates on other airlines? [Page No. 60,63]
PRICING IN SERVICES
The pricing of services is different from the pricing of goods in many ways. Price has a
single name in the manufacturing sector, whereas it takes different names in the
services sector. For example, the price charged for advertising is known as commission,
for boarding and lodging services, as tariff; for legal services and health care as fees;
and for share or stock services as brokerage and commission. Pricing of goods is
determined by the market demand in most cases, unless regulated by the government.
On the other hand, price is controlled by different bodies for various services. For
example, prices for government provided services like the railways are completely
controlled by the government; prices for services like banking, power, telephone, and
insurance are partially regulated by the government, prices in hotels, domestic services,
auto servicing, personal care services, recreation, etc., vary according to the demand in
the market; and prices of advertising services, hospitals, expert services like lawyers
and stock brokers are determined by the service providers themselves. [Page No. 66,70]
COMMUNICATION IN SERVICES
Some service providers like financial auditors, tax consultants and doctors do not
promote their services aggressively due to the rules laid down by the regulatory
authorities. For example, chartered accountants, lawyers. doctors, etc., cannot advertise
their services on an individual basis. Therefore, they have to rely on word-of-mouth
publicity,\ handouts, press releases, etc., to promote their services. [Page No. 78,80]
DISTRIBUTION (PLACE) IN SERVICES
ICICI Prudential Life Insurance has developed a multichannel distribution strategy to market its
insurance products. This distribution strategy includes bancassurance (offering banking and
insurance products at one place), direct marketing through individual agents and financial service
consultants, and corporate agents. ICICI Prudential Life runs its operations at 23 locations and
some of them have many branches. The company has won several awards for its innovative
distribution strategies. In the year ended March 31, 2004, the company had issued over 4,30,000
policies, for a total assured sum of over Rs. 8,000 crore and a premium income in excess of Rs.
980 crore. The company has a network of about 30,000 advisors as well as 12 bancassurance tieups. Today, the company is the top private life insurer in the country.
This example proves that the distribution strategy of a company plays a key role in determining its
success. Place, the ‘fourth P’ of the marketing-mix, deals with the development of distribution
strategies. The main aim of these strategies is to make the products and services available and
accessible to customers whenever they want to make a purchase. As part of ‘place’, company
needs to make decisions relating to the channels of distribution like its geographical coverage,
location of the service outlets, inventory, and transportation. [Page No. 83,85]
PEOPLE IN SERVICES
Like manufacturing organisations, service organisations are also trying to use
technology to get their tasks done more effectively and efficiently. Tellers in banks are
being replaced by ATMs, call centre operators in service centers are being replaced by
computers and many such jobs are being automated. However, service organisations
have realised that they cannot completely replace people with machines. They do need
people because machines can act and respond only in the way they are programmed
and therefore cannot deal with exceptional situations. [Page No. 93,97]
People Strategies:
Attracting the Best Talent
Motivating
Training
Retaining
Training
Right Person at Right Time for Right Work with Right Cost & Right pace…….
PHYSICAL EVIDENCE IN SERVICES
Services are intangible by nature. However, we rarely come across a service
organisation that does not offer any tangibles to its customers. We cannot imagine a
bank without a single chair to sit down on, a coffee shop with dowdy interiors or a star
hotel without well-dressed service personnel. It is but natural for people to judge the
quality of service at a service provider based on the look of the office. Well-furnished
lawyer’s rooms, in a snazzy building, located at the city centre suggest that the lawyer is
successful, efficient and offers quality service. A new client, in the absence of the lawyer
having any reputation to go by, would prefer the services of this lawyer to one who
has a dingy office in an out of the way place. These illustrations clearly establish the
importance of tangibles or physical evidence in the services sector. [Page No. 102,103]
Some of the major elements of physical evidence are:
Physical environment
Modes and content of communication
Price of the service
Appearance and conduct of service personnel,
Tangible elements accompanying service
Brand
PROCESS IN SERVICES
Process is an element of the extended marketing-mix of services marketing. A process
outlines the procedures and methods to be followed to produce and deliver a service.
It also determines the extent of customer involvement and participation required in
service creation and delivery. Therefore, process explains a series of activities, their
sequence and the role to be played by the service provider, the intermediaries and the
customer. It plays an important role in determining the quality of service design,
production and delivery.
A well-designed and well-executed process increases operational efficiency, offers
convenience to customers, reduces the cost of offering services, and improves the
efficiency of service delivery. Effectively, it helps in achieving the goal of customer
satisfaction. [Page No. 111]
POSITIONING OF SERVICES
After segmenting and selecting the target market, the next logical step in developing a
market strategy is to design a differentiation and positioning strategy. Let us look at
some examples that show the importance of these concepts. The Ritz Carlton is
considered one of the best hotels around the world for ‘customer service’. Daewoo is
well known for manufacturing ‘family cars’. McDonalds, is known for its ‘variety of
products, speed and efficient customer service. Jet Airways in India has received many
awards for being the best airline to serve the economy and business class travellers. All
these companies have differentiated their products/services well enough for their
customers to view them as distinct from their competitors, offers and have helped them
occupy a unique place in their customers’ minds. [Page No. 118, 130]
MARKET
SEGMENTATION
BALANCING OF DEMAND AND CAPACITY IN SERVICES
The demand for airline services can be high in two instances. One is during a period of
economic growth when there is a lot of business activity in the country and the number
of business travellers increases. The second instance is during a festive or holiday
season when the number of leisure travellers increases. On the other hand, the demand
for the airline services reduces when the economy is hit by recession as corporate
enforce budget cuts in the area of travel. The demand also reduces when schools and
colleges have exams or during the off-season. How does the airline manage its capacity
to suit these fluctuations in demand? How should it optimize its services to get maximum
benefits? [Page No. 137, 145, 148]
Perspectives on Service
Quality
Transcendental:
Quality = excellence. Recognized only through
experience
Product-Based: Quality is precise and measurable
User-Based: Quality lies in the eyes of the beholder
Manufacturing- Quality is conformance to the firm’s developed
Based: specifications
Value-Based: Quality is a trade-off between price and value
[Page No. 178]
Importance of Productivity and
Quality for Service Marketers
Productivity
 Helps to keep costs down
– lower prices to develop market, compete better
– increase margins to permit larger marketing budgets
– raise profits to invest in service innovation



May impact service experience (must avoid negatives)
May require customer involvement, cooperation
Quality
- Gain competitive advantage, maintain loyalty
- Increase value (may permit higher margins)
- Improve profits
[Page No. 179]
Credence Quality-9 C’s
⊕Courtesy
⊕Confidentiality
⊕Credibility
⊕Communication
⊕Customer
Knowledge
⊕Contact
⊕Competence
⊕Concern
⊕Consistency
Gap 1: Not knowing what Customers Expect
Gap 2: Not Selecting the Right Service Designs Standards
Gap 3: Not Delivering to Service Standards
Gap 4: Mismatch Between Promises and Performance
Seven Service Quality Gaps
CUSTOMER
Customer needs
and expectations
1. Knowledge Gap
Management definition
of these needs
MANAGEMENT
2. Standards Gap
Translation into
design/delivery specs
3. Delivery Gap
4. I.C.Gap
Execution of
design/delivery specs
Advertising and
sales promises
5. Perceptions Gap
Customer perceptions
of product execution
6. Interpretation Gap
Customer interpretation
of communications
7.
Service Gap
Customer experience
relative to expectations
[Page No. 189]
Prescriptions for Closing
Service Quality Gaps






Knowledge: Learn what customers Expect--conduct
research, dialogue, feedback
Standards: Specify SQ standards that reflect expectations
Delivery: Ensure service performance matches specs-consider roles of employees, equipment, customers
Internal communications: Ensure performance levels match
marketing promises
Perceptions: Educate customers to see reality of service
delivery
Interpretation: Pretest communications to make sure
message is clear and unambiguous.
[Page No. 204]
Measuring Service
Productivity



Traditional measures of service output tend to ignore variations in
quality or value of service
– That is, they focus on outputs rather than outcomes, and stress
efficiency but not effectiveness.
Firms that are more effective in consistently delivering outcomes
desired by customers can command higher prices. Furthermore,
loyal customers are more profitable.
Measures with customers as denominator include:
– profitability by customer
– capital employed per customer
– shareholder equity per customer
[Page No. 219]
Cause and Effect Chart for
Airline Departure Delays
Facilities,
Equipment
Arrive late
Oversized bags
Customers
Frontstage
Personnel
Procedure
Delayed check-in
Gate agents
Aircraft late to
procedure
gate cannot process fast
Mechanical enough
Acceptance of late
Failures
passengers
Late/unavailable
airline crew
Late pushback
Delayed
Departures
Late food
service
Other Causes
Weather
Air traffic
Late baggage
Poor announcement of
departures
Weight and balance
sheet late
Late fuel
Materials,
Supplies
Late cabin
cleaners
Backstage
Personnel
Information
SERVICE RECOVERY
Service recovery refers to the actions taken by an organisation in response to a service
failure. Failures occur for all kinds of reasons – the service may be unavailable when
promised, it may be delivered late or too slowly, the outcome may be incorrect or poorly
executed, or employees may be rude or uncaring.
All of these types of failures bring about negative feelings and responses from
customers. Left unfixed, they can result in customers leaving, telling other customers
about their negative experiences, and even challenging the organisation through
consumer rights organisations or legal channels. [Page No. 224]
An Eight-step Model for Developing Consumer Complaints Management Initiatives
Step One: Define Problem and Gather Information
[Page No. 235]
Step Two: Hold Preliminary Discussions with Major Stakeholders
Step Three: Create a Working Group
Step Four: Prepare Preliminary Draft and Explore Appropriate Structures
Step Five: Consult With Stakeholders
Step Six: Announce and Publicise the Initiative
Step Seven: Implement the Initiative
Step Eight: Monitor, Review and Improve the Initiative
SERVICE MANAGEMENT
Service management, also called IT service management, is the discipline used in
industries that provide services or a combination of goods and services. While widely
used in the IT industry, specifically the ICT (Information and Communication Technology)
sector, service management can be integrated into many other industries.
Service management is usually used in conjunction with operations support systems.
Systems that use service management can include order management, inventory
management, activation, maintenance, performance diagnostics and several other types
of support systems to make sure that these systems are running proficiently and errorfree.
Service management is progressing to the pinnacle as a competent business approach.
To preserve development and customer loyalty in a cutthroat business environment, top
businesses are now identifying the necessity to enhance service and service enabled
competency.
THE SIX DIMENSIONS AND STYLES OF SERVICE LEADERSHIP
Operations-driven vs. Customer-driven Actions to
Improve Service Productivity
Operations-driven strategies
 Control costs, reduce waste
 Set productive capacity to
match average demand
 Automate labor tasks
 Upgrade equipment and
systems
 Train employees
 Leverage less-skilled
employees through expert
systems
Customer-driven strategies
 Change timing of customer
demand
 Involve customers more in
production
 Ask customers to use third
parties
BMS Examination Pattern
The marks are divided into 2 parts
40 Marks
60 Marks
External
examination
Internal Examination
20 M
Projects, Presentations, Behavior,
Attendance etc.
20 M
Class Test
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