Chap 1of services 1 (18-9-12) excellent

Marketing Of Services-1Chapter No.1

Service Economy

1ChapterChapter

Introduction to ServicesIntroduction to Services

What is service economy? Why services marketing? Reasons for growth of service

economy: Characteristics of Services

Compared to Goods:

Service Economy Service Economy

“In a service economy a large proportion of the working population

is employed not in agriculture and manufacturing but in service jobs. In

service economies too a large proportion of output is provided by

the service sector.”

Historical Background of service economy:

Historical Background of service economy:

Till second world war most of the developed economies

(Like UK,USA, Australia, Germany) were considered as the service oriented

economies.

Fuchs Wrote in 1968: The United States has become the world’s first Service Economy during the period followed by World War II, first nation in which half of the population is involved in intangible services other than food automobiles ,houses ,cloth etc Smith narrated in 1972:To measure and interpret service output we should identify weaknesses in the statistical treatment of services.Heilbroner: The growth of services increases the possibility of Govt interference in the market mechanism towards a planned economic system on order to maintain essential services.

What Economists and Marketers Say about Service Economy……

Factors Influencing Service Economy (Specifically UK)Factors Influencing Service

Economy (Specifically UK)

Services And Employment Services And Output Services And Consumption Services And balance of

payments

1.Services And Employment :1.Services And Employment :

Economic Activities are divided into three classes:

Primary: (Agriculture, forestry fishing)Secondary:

(Manufacturing & Construction Industries)Tertiary:

(Services & Distributive Trades)

2.Services And Output:2.Services And Output:

Service output are measured on the basis of Service Quality and Service quantity

Unreliability is the factor which involves increased difficulty level of measuring the actual output of services

3.Services and

consumption3.Services and

consumptionChanging life patternsMoving to hold convenience life.Devices with extra services As consumption level of people for products increase it will provoke the people to go for effective use of services .

4.Services and Balance of Payments

4.Services and Balance of Payments

Funds Currency rateRegulation of economic activities……

Reasons for growth of service economy

Reasons for growth of service economy

The lag in growth in labor productivity in services.

Growth in intermediate demand from firms.

Growth in final demand from consumers

A…The lag in growth in labor productivity in

services.

A…The lag in growth in labor productivity in

services.A greater decline in hours worked per MAN IN

SERVICE than in INDUSRTY.A more rapid increase in the quality of labour in

industry than in service.A difference in the physical capital per worker

available in industry compared with service.More rapid technological change in industry

than in service ,that industry benefited more from scale economies

B…Growth in intermediate demand from Firms:

B…Growth in intermediate demand from Firms:

Intermediate demand from firms means creating or filling the need

of inputs provided to manufacturing and other sectors

of economy. Depending on intermediate demand firms are divided into three categories:

CONTD…..CONTD…..

Specialists Firms:Set up to provide services previously carried

out by existing firms. e.g: Engineering services, personnel services. Alternatively Specialists Firms: Set up to provide new services. e.g :data

processing. Business Buyers:They use services like :accounting,construction,banking,insurance,lega

l,research,advertising,publicrelations,training,shipping,consultancy services.

Analysis: Analysis:

Companies and other organizations rely on specialist services as it is the need of the

day to take hold on technological and competitive pressure with lack of available resources organizations encourage to use

outside services other than internally based services.

C…Growth in Final demand from Consumers:

C…Growth in Final demand from Consumers:

As societies get wealthier people generate final demands to ordinary and l uxorious services.

According to Law of Economies:“As societies get wealthier and as the marginal utility derived

from additional increments of goods decline then people turn to services expenditures.”

It tells us about the relationship between income &spending patterns on goods & services.(travel,health,recreation,education,with changing lifestyles.

We will discuss post industrial

society as it is based on services:

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Transformation of Industrial to Post Industrial Society:

Transformation of Industrial to Post Industrial Society:

First Stage:Industry develops by expansion of transportation and of

public utilities with increasing use of energy with non manufacturing blue collar forces.

Second Stage:It involves mass consumption of goods and services with

increasing population and changing trends to whole sale and retail in term of finance, real estate and insurance.

CONTD…….CONTD…….

Third Stage:A German Statistician Christian Engel

said:“The proportion of money devoted to food at home begins to drop and the marginal increments are used first for durables and then for luxury and recreation.”

Personal services begin to grow as restaurants,hotels,autoservices,travel entertainment ,sports need for technical accessories etc.

Contributions of Service Industries toU.S. Gross Domestic Product

Contributions of Service Industries toU.S. Gross Domestic Product

Examples of Service IndustriesExamples of Service Industries

Health Care hospital, medical practice, dentistry, eye care

Professional Services accounting, legal, architectural

Financial Services banking, investment advising, insurance

Hospitality restaurant, hotel/motel Catering, Entertainment & recreational

Travel airline, travel agency, theme park

Others hair styling, pest control, plumbing, lawn maintenance, counseling

services, health club, interior design, Communication

Why study Services Marketing?Why study Services Marketing?

Service-based economies

Service as a business imperative in manufacturing and IT

Deregulated industries and professional service needs

Service equals profits

Services marketing is different

Figure 1.2

Tangibility SpectrumFigure 1.2

Tangibility Spectrum

TangibleDominant

IntangibleDominant

SaltSoft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teaching

Fast-foodOutlets

Fast-foodOutlets

Challenges for ServicesChallenges for Services

Defining and improving quality Designing and testing new services Communicating and maintaining a consistent image Accommodating fluctuating demand Motivating and sustaining employee commitment Coordinating marketing, operations, and human resource

efforts Setting prices Finding a balance between standardization versus

personalization Ensuring the delivery of consistent quality

Impact of Service Economy on Marketing:

Impact of Service Economy on Marketing:

Marketers trend to make investments on use of services.

Market search requires area and economy wise marketing

Which economy is more rich in which services

To explore new services for changing patterns of economy.

ASSIGNMENT………(Marks /10)ASSIGNMENT………(Marks /10)

Select ONE country. Analyze its SERVICE CONTRIBUTION PERCENTAGE in its GDP.

Make a PIE CHART of the country’s service contribution in different sectors of its economy.

Conclude which service sector has the highest contribution in GDP of the selected country.

TASK:

HOW TO SUBMIT Assignment……HOW TO SUBMIT Assignment……

Written Report of not more than 3 pages

Presentation to be made in MS PowerPoint.

Two students should be in one group.Report = 5 marksPresentation = 5 marks.