Services MarketingINTRODUCTION TO SERVICES MARKETINGUnit 1

What are Services ? ? ? Any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may not be tied to a physical product.- Kotler An act of performance offered by one party to other. Although the process may be tied to a physical product, the performance is transitory, often intangible in nature and does not normally result in ownership of any factors of production.- Valarie

What are Services ? ? ? Services are generally intangible and relatively quick perishable activities whose buying takes place in an interaction process aimed at creating customer satisfaction, but during this interactive consumption this does not always lead to material possession- Kasper A set of activities or benefits which produce a product, which is normally intangible in nature, perishable, which gratify the customers needs or problems. Services can also be provided in connection with the sale of tangible goods for creating value perceptions among customers- Vinnie & Kirti

What are Services ? ? ?Services are intangible, inseparable, variable, and perishable productsServices are deeds, processes, and performancesInclude all economic activities whose output is not physical product, is generally consumed at the time it is produced, and provides added value in forms that are essentially intangible concerns of its first purchaser

Service Vs Customer ServiceCustomer service is the service provided in support of companys core productsAnswering questions, taking orders, dealing with billing issues, handling complaints, scheduling maintenance or repairsTypically there is no charge for customer service

TANGIBILITY SPECTRUMThe broad definition of services implies that intangibility is a key determinant of whether an offering is a service.There are very few pure services or pure goodsExample: Fast Food Industry Automobile, while classified as a manufacturing Sector, also supply intangible s such as transportation and navigation services.

FAST FOOD OUTLETSTANGIBILITY SPECTRUM

SERVICE SECTORThe portion of the economy that produces intangible goodsService sector is the lifeline for the social economic growth of a countryLargest and fastest growing sector globallyThe growth associated with development caused by service sector has the ability to transform a developing country to a developed one.This sector dominates with the best jobs, best talent and best incomes!!!!!!

Industries within the Service Sector

06-0707-0808-0909-1010-11*11-12**Trade, hotels, & restaurants17.117.116.916.616.925.2#Trade15.415.415.315.115.4Hotels & restaurants1.71.71.51.41.5Transport, storage, & communication8.28.07.87.87.7Railways0.91.00.91.00.8Transport by other means5.75.65.55.35.4Storage0.10.10.10.10.1Communication1.51.41.41.51.4Financing, insurance, real estate, &business services14.815.115.915.816.416.9Banking & insurance5.55.55.65.45.8Real estate, ownership of dwellings, & business services9.39.610.310.410.6Community, social, & personal services12.812.513.314.514.314.2Public administration & defence5.25.15.86.76.3Other services7.67.47.57.97.9Construction8.28.58.58.28.28.1Total services (excluding construction)52.952.753.954.755.156.3Total services (including construction)61.061.262.463.063.364.4

SERVICES MARKETINGServices Marketing refers to the marketing of services as against tangible products.

Services marketing first came to the force in the 1980s when the debate started on whether marketing of services was significantly different from that of products so as to be classified as a separate discipline.

Why Services Marketing??What are the reasons for emergence of services marketing?Service based economiesIncreasing contribution to a nations GDP (both developed & developing economies)Service as a business imperative in manufacturing & information TechnologyImpetus came from the evolution & increased competitiveness of the traditional service industries viz., banking, transportation, healthcare, etc

Why Services Marketing??What are the reasons for emergence of services marketing?Unorganized industries & professional service needsChange in business models of the deregulated & professional services (Meru- taxi service, Muthoot- lending)Service marketing is differentChallenge in standardization- human intervention

Reasons for the growth in Services SectorBroadly categorized into two:Growth in intermediate demand from firmsGrowth in final demand from customers

Reasons for the growth in Services SectorBroadly categorized into two:Growth in intermediate demand from firmsWith the growth of competition and the pace of change in consumer exposure and expectations forced organizations to look for specialized services.The wave of specialist services during the last three decades changed management philosophies and encouraged them to outsource many services.

Reasons for the growth in Services SectorBroadly categorized into two:Growth in final demand from customersIncrease in affluence (250 M middle income group & 1.5 L millionaires- travel, entertainment)More Leisure time (education, skill development, personal care)Working woman (baby sitting, fitness, health care)Growth in population ofDINKS (disposable income)Greater life expectancy (health services)Greater complexity of products (maintenance services)

Reasons for the growth in Services SectorBroadly categorized into two:Growth in final demand from customersGreater complexity in life (tax consultants, counselling, employment services)Greater concern for resources scarcity and ecology (mostly government initiated- conservation of forests/ animals)Increasing number of new products (consultancy services)The Young (tend to use more and more services than the older generation)

Services Characteristics

GoodsServicesResulting implicationsTangible Intangible Services cannot be inventoriedServices cannot be easily patentedServices cannot be readily displayed or communicatedPricing is difficult

Standardized HeterogeneousService delivery and customer satisfaction depend on employee and customer actionsService quality depends on many uncontrollable factorsThere is no sure knowledge that the service delivered matches what was planned and promoted

Services Characteristics

GoodsServicesResulting implicationsProduction separate from consumptionInseparability - simultaneous production and consumptionCustomers participate in and affect the transactionCustomers affect each otherEmployees affect the service outcomeDecentralization may be essential

Non-perishable Perishable It is difficult to synchronize supply and demand with servicesServices cannot be returned or resoldstrong recovery strategies required when things go wrong

Services Marketing TriangleCOMPANYEMPLOYEESCUSTOMERSINTERNAL MARKETINGEXTERNAL MARKETINGINTERACTIVE MARKETING

External marketing- Making PromisesCompany makes promises to its customers regarding what they can expect and how it will be deliveredThe service employees, the design and dcor of the facility, and the service process itself also communicate and help to set customer expectationsPromises should be consistent and realisticThere is a tendency to overpromise

Interactive Marketing- Keeping PromisesMost critical from the customers point of viewIt occurs in the moment of truth when the customer interacts with the organization and the service is produced and consumedReliability of service is tested every time the customer interacts with the organization

Internal Marketing- Enabling PromisesTakes place through enabling of the servicesProviders must have the skills, abilities, tools, and motivation to deliverPromises are easy to make, but unless providers are recruited, trained, provided with tools and appropriate internal systems, and rewarded for good service, the promises may not be kept

Employee satisfaction and customer satisfaction are inextricably linked .

Marketing MixElements an organization controls that can be used to satisfy or communicate with customersTraditional marketing mix- 4Ps

Expanded mix

PeopleAll human actors who play a part in service delivery and thus influence the buyers perceptionsFirms personnelCustomerOther customers in the service environment

Physical evidenceThe environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the servicePackaging, Brochures, Furnishings, Uniforms

ProcessThe actual procedures, mechanisms, and flow of activities by which the service is deliveredThe service deliveryOperating systemsCan have standardized approach or customized approach

Trends in Services MarketingExtensive use of TechnologyNiche marketing -> Local MarketingFood, apparels, retailingCustomization -> Mass customization -> PersonalizationInsurance- RidersTelecom- only I have & not othersBundling of ancillary services Banking- transactions, limits

Trends in Services MarketingCustomers as co-producersInvolving in production processSimulation marketingRetailing -> lenskart, apparels

SERVICE SECTOR TRENDS

Indias services sector has emerged as a prominent sector in terms of its contribution to National and state incomesTrade flowsFDI inflowsEmployment.

Sector wise contribution to GDP

Sector1950-601961-701971-801981-901991-20002001-102011-122012-13Primary/ Agriculture55.347.642.837.330.921.814.113.7Secondary/ Industries14.819.621.322.323.324.527.527Tertiary/ Services29.832.835.940.345.753.758.459.3

1.Indian Banking SectorCurrently valued at Rs 81 trillionHas the potential to become the fifth largest banking industry in the world by 2020 and the third largest by 2025Banks are now reaching out to the masses with technology to facilitate greater ease of communication, and transactions are carried out through the Internet and mobile devices

The revenue of Indian banks increased four-fold from US$ 11.8 B to US$ 46.9 billion in the period 20012010 & PAT rose about nine-fold from US$ 1.4 B to US$ 12 B.Road ahead- The scope for mobile and internet banking is big. At the start of 2013, only 2 per cent of banking payments went through the electronic system in the country which is dramatically changing.

The last decade saw customers embracing ATM, internet and mobile banking. The number of ATMs has doubled over the past few years, with more than 100,000 in the country at present (70 per cent in urban areas). They are estimated to further double by 2016, with over 50 per cent expected to be set up in small towns.

2.Education SectorThe education sector of India is divided into two main segments; the core segment comprises of schools and higher education, while the non-core comprises of coaching classes, pre-schools and vocational trainings.The market size of Indian education sector is expected to increase to Rs 602,410 crore (US$ 97.03 billion) by FY15 on back of strong demand for quality education

The private education segment alone is expected to cross US$ 45 billion mark by 2015 from the present US$ 35 billionMajor investments are being seen in the areas of pre-schools, private coaching and tutoring, teacher training, the development and provision of multimedia content, educational software development, skill enhancement, IT training and e-learning

India's online education market size is set to grow to US$ 40 B by 2017 from the present US$ 20 BThe education sector has attracted foreign direct investments (FDI) worth Rs 4,596.96 cr (US$ 740.35 M) during April 2000 to Sep 2013

India is expected to achieve demographic dividend by 2030 with half the population in its workforce and the largest workforce in the worldThere is clearly an opportunity for private players to enter the education space. This opportunity exists in all three segments schooling, higher education and vocational training

3.Financial ServicesThe sector comprises Commercial banksInsurance firmsCooperativesNon-banking institutionsMutual funds, pension funds and other financial entities.

Over the last 20 years, the sector has developed a more modern outlook. The government introduced several reforms to liberalise, regulate and enhance the country's financial services by embracing best international practices. The results have been encouraging, with India today globally recognised as among the most vibrant and transparent capital markets regarding market efficiency and transparency

4.Insurance SectorInsurance companies will now have greater freedom to invest in sectors such as IT and pharma. IRDA has increased the sector specific exposure limit for investments by insurers to 20 % of the total investment, from 15 %. Up till now, life and non-life insurers were allowed to take an exposure in a specific sector excluding banking, financial services and infrastructure sectors to 15 %of total investments (which included debt and equity)The countrys insurable population is projected to touch 750 million by 2020

Mutual Funds The mutual fund industry grew its assets by 11 per cent (Rs 85,000 crore), to Rs 8.78 trillion (US$ 141.13 billion) in 2013 from Rs 7.93 trillion (US$ 127.46 billion) in 2012Securities and Exchange Board of India (SEBI) has earmarked nearly 85 districts for likely adoption by fund houses; these areas have high bank deposits but limited investment opportunities. SEBI has made necessary provisions to cater to the sectors demands

5.HealthcareComprises hospitals, medical infrastructure, medical devices, clinical trials, outsourcing, telemedicine, health insurance and medical equipmentExpected to reach US$ 160 billion by 2017

The Indian medical device and equipment market is expected to grow to around US$ 5.8 B by 2014 and US$ 7.8 B by 2016. Indias medical device market is currently the fourth largest in Asia with 700 medical device makers, and ranks among the top 20 in the world

FDI (during April 2000 to September 2013 )-Hospital and diagnostics centre in India- US$ 2,057.29 million, Drugs & pharmaceutical- US$ 11,391.03 millionMedical & surgical appliances industry- and US$ 720.41 million

Medical Tourism- Health tourism is gaining momentum in India & expected to become a US$ 5 billion business by 2015India has witnessed an influx of patients from Africa, CIS countries, Gulf and SAARC nations, Pakistan, Bangladesh and Myanmar, who mainly come for organ transplant, orthopedic, cardiac and oncology problems

6.IT & ITESThe IT and ITES sectors go hand-in-hand in every aspectThe industry has not only transformed Indias image on the global platform, but also fuelled economic growth by energising higher education sector (especially in engineering and computer science). The industry has employed almost 10 million Indians and hence, has contributed a lot to social transformation in the country

Firms, across all other sectors, largely depend on the IT & ITeS service providers to make their business processes efficient and streamlined. Indian manufacturing sector has the highest IT spending followed by automotive, chemicals and consumer products industries

India's IT-business process outsourcing (BPO) industry revenue is expected to cross US$ 225 billion mark by 2020India is expected to become world's second-largest online community after China with 213 million internet users by December 2013 and 243 million by June 2014

7.Media & Entertainment IndustryRegistered an overall growth of 12.6 %, from Rs 728 billion (US$ 11.74 billion) in 2011 to Rs 821 billion (US$ 13.24 billion) in 2012The industry is armed with digital technologies, state-of-the-art mobile devices, penetration of broadband and digital cinema

The Indian print industry is the second largest in the world. There are over 82,000 newspapers in India with a daily circulation of over 100 million copiesTotal advertising expenditure across media was Rs 327.4 billion (US$ 5.28 billion) in 2012

8.Real estateIndia continues to be a favoured destination globally for investorsThe second largest employment generation sector after agriculture, real estate contributes about 6.3 per cent to Indias gross domestic product (GDP). The foreign direct investment (FDI) in the sector is expected to touch US$ 25 billion in the next 10 years from its current US$ 4 billion

The sectors progress is driven by factors such as rapid urbanisation, a growing trend towards nuclear families, positive demographics, ruralurban migration, ever-developing infrastructure, higher income levels and housing demand

9.Retail SectorEstimated to be worth more than US$ 500 billion, the Indian retail industry is considered as one of the worlds top five retail markets in terms of economic value

India's strong growth fundamentals along with increased urbanisation and consumerism have opened up immense scope for retail expansion. Further, easy availability of Debit/ Credit cards has contributed significantly to a strong and growing online consumer culture in India. With the online medium of retail gaining more and more acceptance, there is a tremendous growth opportunity for retail companies, both domestic and international

The Indian retail market is expected to touch US$ 1.3 trillion by 2020 from its existing level of around US$ 500 billionIndias urban population has contributed immensely to the growth of the online market in the country. Around 3040 per cent of the total retail in Indias top 75 cities is expected to be carried out online in the next 710 years

Of the total online market products, consumer durables account for 34 %, apparel and accessories 30 %, books 15 %, beauty and personal care 10%, and home and furnishing 6%. Over 50 per cent of sales in these product categories take place in non-metro cities.

10.TelecomIndia is the worlds second-largest telecommunications marketThe mobile phone industry in India is likely to contribute US$ 400 billion to the countrys gross domestic product (GDP) and has the potential to generate about 4.1 million additional jobs by 2020

The mobile ecosystem generated approximately 5.3 per cent of the GDP for India, and directly supported 730,000 jobs in 2012The telecommunications industry attracted foreign direct investments (FDI) worth US$ 12,889 million in the period April 2000September 2013

India has over 50 per cent mobile-only internet users, possibly the worlds highest compared to 2025 per cent across developed countries

11.Tourism industryThe travel and tourism industry has emerged as one of the fastest growing sectors contributing significantly to economic growth and developmentIndia has significant potential to become a preferred tourist destination globally. Its rich and diverse cultural heritage, abundant natural resources and biodiversity provides numerous tourist attractions

The total market size of tourism and hospitality industry in India stood at US$ 117.7 billion and is anticipated to touch US$ 418.9 billion by 2022Foreign tourist arrivals (FTA) during the period JanuaryDecember 2013 stood at 68.48 lakh as compared to FTAs of 65.78 lakh during 2012, registering a growth of 4.1 per cent

Employment Stats

State-wise Employment in Different Sectors (per 1000 employed people)

State/UTAgriculture & alliedIndustryServices with constructionServices without constructionRuralUrbanRuralUrbanRuralUrbanRuralUrbanAndhra Pradesh6875397241217705150583Arunachal Pradesh7571403241213817158722Assam7252738137257833222757Bihar66914653121279732174609Chhattisgarh849533928211266683553Delhi01120285879712542682Goa23914365289397696353552Gujarat7835362306156641112576Haryana5985398319304627195511Himachal Pradesh6298553149320767167676Jammu &Kashmir59711084227316662218552Jharkhand5485292160361787145602

State-wise Employment in Different Sectors (per 1000 employed people)

State/UTAgriculture & alliedIndustryServices with constructionServices without constructionRuralUrbanRuralUrbanRuralUrbanRuralUrbanKarnataka7579467221176686132558Kerala357110132178511711357570Madhya Pradesh824984820312870062569Maharashtra7944752236154716116638Manipur53420590118377677240604Meghalaya707585665236877178780Mizoram8063601453180587128499Nagaland7412191735241745200684Odisha 67610384215240683144549Punjab6188381249298669168552Rajasthan6337054186312743110595Sikkim53904899414901282874

State-wise Employment in Different Sectors (per 1000 employed people)

State/UTAgriculture & alliedIndustryServices with constructionServices without constructionRuralUrbanRuralUrbanRuralUrbanRuralUrbanTamil Nadu637136117276246586146482Tripura306216389633891244716Uttarakhand 6955441199263747131629Uttar Pradesh6699176257257653134551West Bengal56336173279265683206621A & N Islands430309198477873330766Chandigarh3122145122826856629778Dadar & Nagar Haveli59138160632251332155315Daman & Diu548394340177110430106398Lakshadweep45227757164491558361483Pondicherry46129144201396770238647Tamil Nadu637136117276246586146482

International Comparison

RankCountryShare of ServicesServices Growth(% of GDP)Rate (%)2001200920102001200920101US77.079.078.22.9-1.41.22Japan69.871.770.02.0-4.82.93China39.842.141.810.39.69.64Germany69.773.772.52.1-1.62.35France76.578.978.11.7-1.10.26UK73.978.878.43.5-3.21.17Italy70.173.673.32.3-2.91.28Brazil65.367.666.81.83.04.89Spain65.770.571.03.4-1.00.710Canada64.970.770.23.60.12.511India50.056.557.07.510.17.712Russia63.362.061.53.2-5.62.9World68.168.767.82.9-0.92.5

Service sector industries contributing to the growing trend

Share of different Services in GDP

06-0707-0808-0909-1010-11*11-12**Trade, hotels, & restaurants17.117.116.916.616.925.2#Trade15.415.415.315.115.4Hotels & restaurants1.71.71.51.41.5Transport, storage, & communication8.28.07.87.87.7Railways0.91.00.91.00.8Transport by other means5.75.65.55.35.4Storage0.10.10.10.10.1Communication1.51.41.41.51.4Financing, insurance, real estate, &business services14.815.115.915.816.416.9Banking & insurance5.55.55.65.45.8Real estate, ownership of dwellings, & business services9.39.610.310.410.6Community, social, & personal services12.812.513.314.514.314.2Public administration & defence5.25.15.86.76.3Other services7.67.47.57.97.9Construction8.28.58.58.28.28.1Total services (excluding construction)52.952.753.954.755.156.3Total services (including construction)61.061.262.463.063.364.4

Annual growth in Services GDP

06-0707-0808-0909-1010-11*11-12**Trade, hotels, & restaurants11.110.15.77.8911.2 #Trade10.89.86.78.39.1Hotels & restaurants14.413-3.32.87.7Transport, storage, & communication12.612.510.814.814.7Railways11.19.87.79.46.8Transport by other means98.75.37.28.4Storage10.93.414.18.77.9Communication24.324.125.131.727.2Financing, insurance, real estate, &business services1412129.410.49.1Banking & insurance20.616.71411.314.5Real estate, ownership of dwellings, & business services9.58.410.47.86.9Community, social, & personal services2.86.912.5124.55.9Public administration & defence1.97.619.818.21.3Other services3.56.37.47.27.3Construction10.310.85.3784.8Total services (excluding construction)10.110.31010.59.39.4Total services (including construction)10.110.39.4109.28.8