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ROLE OF SERVICES IN AN ECONOMY
Welcome to Service Marketing Management
LEARNING OBJECTIVES
Describe the central role of services in an economy.
Discuss the evolution of an economy from an agrarian society to a service society.
Describe the features of preindustrial, industrial, and postindustrial societies.
Describe the features of the new service economy
HOW WOULD ONE DEFINE A SERVICE SECTOR?
A service is any activity or benefit that one party can offer to another which is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product. Kotler, Armstrong, Saunders and
Wong (1999)
HOW WOULD ONE DEFINE A SERVICE SECTOR?
… services … anything that cannot be dropped on your foot. The Economist
Services are economic activities that create value and provide benefits for customers at specific times and places as a result of bringing about a desired change in – or on behalf of – the recipient of the service. Christopher Lovelock
HOW WOULD ONE DEFINE A SERVICE SECTOR?
Services are production of essentially intangible benefits and experience, either alone or as part of a tangible product, through some form of exchange, with the intention of satisfying the needs, wants and desires of the consumers.
SERVICE DEFINITIONS
Services are deeds, processes, and performances.
Valarie Zeithaml & Mary Jo Bitner
A service is a time-perishable, intangible experience performed for a customer acting in the role of a co-producer.
James Fitzsimmons
DEFINITION OF SERVICE FIRMS
Service enterprises are organizations that facilitate the production and distribution of goods, support other firms in meeting their goals, and add value to our personal lives.
James Fitzsimmons
ROLE OF SERVICES IN AN ECONOMY
PERCENT SERVICE EMPLOYMENT FOR SELECTED NATIONS
Country 1980 1987 1993 2000
United States 67.1 71.0 74.374.2
Canada 67.2 70.8 74.8 74.1
Israel 63.3 66.0 68.0 73.9
Japan 54.5 58.8 59.972.7
France 56.9 63.6 66.470.8
Italy 48.7 57.7 60.2 62.8
Brazil 46.2 50.0 51.9 56.5
China 13.1 17.8 21.2 40.6
India 40.99 42.25 45.62 51.16
TRENDS IN U.S. EMPLOYMENT BY SECTOR
0
10
20
30
40
50
60
70
80
90P
rop
ort
atio
n o
f to
tal e
mpl
oye
men
t
Year
Service
Manufacturing
Agriculture
SERVICE SECTOR OF INDIAN ECONOMY
contributes to around 55 percent of India's GDP during 2006-07. This sector plays a leading role in the economy of India, and contributes to around 68.6 percent of the overall average growth in GDP between 2002-03 and 2006-07.
SERVICES
Information Technology (the most leading service sectors in Indian economy)
IT-enabled services (ITeS) Telecommunications Financial Services Community Services Hotels and Restaurants
STAGES OF ECONOMIC DEVELOPMENT
Pre- Use of Standard dominant human Unit of of living Society Game activity labor social life measure Structure Technology
Pre- Against Agriculture Raw Extended Sub- Routine Simple hand Industrial Nature Mining muscle household sistence Traditional tools power Authoritative
Industrial Against Goods Machine Individual Quantity Bureaucratic Machines fabricated production tending of goods Hierarchical nature Post- Among Services Artistic Community Quality of Inter- Information industrial Persons Creative life in terms dependent Intellectual of health, Global education, recreation
THE NEW EXPERIENCE ECONOMY
Economy Agrarian Industrial Service Experience
Function Extract Make Deliver Stage
Nature Fungible Tangible Intangible Memorable
Attribute Natural Standardized Customized Personal
Method of supply
Stored in bulk
Inventoried Delivered on demand
Revealed over time
Seller
Trader
Manufacturer
Provider
Stager
Buyer
Market
User
Client
Guest
THE FOUR REALMS OF AN EXPERIENCE
Customer Participation
Passive Active
Environmental
Absorption Entertainment (Movie)
Education (Language)
Relationship Immersion Esthetic (Tourist)
Escapist (ScubaDiving)
EXPERIENCE DESIGN PRINCIPLES
Theme the Experience (Forum shops) Harmonize Impressions with Positive
Cues(O’Hare airport parking garage)
Eliminate Negative Cues(Cinemark talking trash containers)
Mix in Memorabilia (Hard Rock T-shirts)
THEME THE EXPERIENCE (FORUM SHOPS)
THEME THE EXPERIENCE (FORUM SHOPS)
THEME THE EXPERIENCE (FORUM SHOPS)
THEME THE EXPERIENCE (FORUM SHOPS)
IMPRESSIONS WITH POSITIVE CUES (O’HARE AIRPORT PARKING GARAGE)
MIX IN MEMORABILIA
SOURCE OF SERVICE SECTOR GROWTH Innovation
Push theory (e.g. Post-it)Pull theory (e.g. Cash Management)Services derived from products (Video Rental)Information driven servicesDifficulty of testing service prototypes
Social Trends Aging of the populationTwo-income familiesGrowth in number of single peopleHome as sanctuary
DISCUSSION TOPICS
Illustrate how the type of work he or she does influences a person’s lifestyle. For example, contrast a farmer, a factory worker, and a school teacher.
Is it possible for an economy to be based entirely on services?
What is the value of self-service in an economy?
INTERACTIVE CLASS EXERCISE
The class breaks into small groups. Each group identifies service firms that should be listed in the top Fortune 100 and places them in rank order of estimated annual revenue.
http://money.cnn.com/magazines/fortune/fortune500/2010/full_list/
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