India’s Economy_The Road Ahead Video- India’s Economy_The Road Ahead

Overview of Chapter 1 Why Study Services? The Service Industry. What are Services? Characteristics of Services and difference between Product & Service. The Expanded Marketing Mix Required for Services.

Why Study Services?

Why Study Services? (1) Services dominate economy in most nations Understanding services offers you personal competitive advantages Importance of service sector in economy is growing rapidly: Services account for more than 60 percent of GDP worldwide Almost all economies have a substantial service sector Most new employment is provided by services Strongest growth area for marketing

Why Study Services? (2) Video- The Growth Potential of Service Sector Most new jobs are generated by services Fastest growth expected in knowledge-based industries Significant training and educational qualifications required, but employees will be more highly compensated Will service jobs lost to lower-cost countries? Yes, some service jobs can be exported

Changing Structure of Employment as Economic Development Evolves Share of Employment Agriculture Services Industry Time, per Capita Income Source: IMF, 1997

Share of Major Sectors in Total Employment (per cent) 1999-2000 2004-05 2011-12 Agriculture & allied 59.9 58.5 48.9 Industry 16.4 18.2 24.3 Services 23.7 23.3 26.9

Why Study Services? (3) Powerful forces are transforming service markets Government policies, social changes, business trends, advances in IT, internationalization These forces are reshaping Demand Supply The competitive landscape Customers’ choices, power, and decision making

Services & The Indian Economy- Video on India’s GDP for the last….

GDP 9.3 6.7 8.6 8.9 6.7 4.5 4.7 Expected GDP for 2014-2015- 5.3-5.4 Sector 2007-08 2008-09 2009-2010 2010-2011 2011-12 2012-13 2013-14 GDP 9.3 6.7 8.6 8.9 6.7 4.5 4.7 Expected GDP for 2014-2015- 5.3-5.4 The services sector has emerged as the fastest growing sector of the economy and the second fastest growing in the world, with a CAGR of 9 per cent, behind China with a CAGR of 10.9 per cent during the period from 2001 to 2012.

Share in GDP Sector 1999-2000 2007-2008 2012-2013 2013-2014(P) Agriculture & Allied 23.2 16.8 13.9 Industry 26.8 28.7 27.3 26.1 Services 50.0 54.4 58.8 59.9 Trade, hotels, transport, and Communication 21.2 25.9 26.59 26.4 Financing, insurance, real estate & Business Services 14.5 16.1 19.1 20.6 Community, social, and personal 14.4 12.4 12.8 12.9

Sector 1999-2000 2007-08 2012-13 2013-14(P) Agriculture & allied 23.2 16.8 13.9 13.9 Industry 26.8 28.7 27.3 26.1 Services 50.0 54.4 58.8 59.9 Trade, hotels, transport, and 21.2 25.9 26.9 26.4 communication Financing, insurance, real estate 14.5 16.1 19.1 20.6 business services Community, social, and personal 14.4 12.4 12.8 12.9 services

Examples of Service Industries- Video_Getting to knw the serivce sector Health Care hospital, medical practice, dentistry, eye care Professional Services accounting, legal, architectural Financial Services banking, investment advising, insurance Hospitality restaurant, hotel/motel, bed & breakfast, ski resort, rafting Travel airlines, travel agencies, theme park Others: hair styling, pest control, plumbing, lawn maintenance, counseling services, health club

What Are Services?

What Are Services? (1) The historical view Goes back over 200 years to Adam Smith and Jean-Baptiste Say Different from goods because they are perishable (Smith 1776) Consumption cannot be separated from production, services are intangible (Say 1803)

Defining Services Services Are economic activities offered by one party to another In exchange for money, time, effort service customer expect value from access to goods, labor, professional skills, facilities, networks, and systems, but they do not normally take ownership of any of the physical elements involved.

Difference Between a Goods & Services Video- Differences Between a Product & Service

Differences Between Goods and Services Intangibility Heterogeneity Simultaneous Production and Consumption/ Inseparable Perishability

Implications of Intangibility Services cannot be inventoried Services cannot be patented Services cannot be readily displayed or communicated Pricing is difficult

Implications of Heterogeneity Services are heterogeneous across time, organizations and people Service delivery and customer satisfaction depend on employee actions Service quality depends on many uncontrollable factors There is no sure knowledge that the service delivered matches what was planned and promoted

Implications of Simultaneous Production and Consumption Customers participate in and affect the transaction- Real Time nature of Service Customers affect each other Employees affect the service outcome Decentralization may be essential Mass production is difficult

Implications of Perishability Cannot be saved, stored, resold, reclaimed and returned It is difficult to synchronize supply and demand with services Services cannot be returned or resold

Table 1-2 Services are Different Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, “Problems and Strategies in Services Marketing,” Journal of Marketing 49 (Spring 1985): 33-46.

Expanded Marketing Mix for Services Video- Service Marketing Mix Service marketing Mix2

Services Require An Expanded Marketing Mix Marketing Mix- the elements an organization controls that can be used to satisfy or communicate with customers. Traditional MM- 4 P’s Expanded Mix for Services- People, Physical Evidence, Process, Productivity & Quality

The 8Ps of Services Marketing Product Elements Place and Time Price and Other User Outlays Promotion and Education Process Physical Environment People Productivity and Quality Fig 1.9 Working in Unison: The 8Ps of Services Marketing

Product- Key Strategic Decisions Physical good features Quality Level Accessories Packaging Warranties Product lines Branding

Place- Key strategic decisions Channel Type Exposure Intermediaries Outlet location Transportation Storage Managing Channels

Promotion- KSD Promotion Blend Salespeople- selection, training, incentives, Advertising-media type, Types of ads Sales Promotion Publicity Internet/web strategy

Price- KSD Flexibility Price Level Terms Differentiation Discounts allowances

People All human actors who play a part in service delivery and thus influence the buyer’s perception: namely, the firm’s personnel, the customer, and other customers in the service environment.

People ‘provider is the service’- e.g consulting, counseling, teaching, famous doctor

People Small part in the service delivery- a telephone installer, an airline baggage handler.

People Customers themselves influence service delivery- e.g patients greatly affect the quality of service, when they comply or do not comply with health regimens prescribed by the doctor.

Physical Evidence The environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate the performance or communication of the service. E.g brochures, letterheads, business cards, reports, signage and equipment Might include the physical facility where service is offered- the servicescape- e.g. retail bank branch facility

Process The actual procedures, mechanisms, and flow of activities by which the service is delivered- the service delivery and the operating systems E.g. Southwest Airlines Vs Singapore airlines Video- The Oberio Group- an awesome place to work

Video- Marketing Mix- The 7th P