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Commercial: banks, airlines, tour operators, hotel and catering ... on Service Sector Management Introduction to Services Differences between Slide ... – PowerPoint PPT presentation

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Title: I.Sci, D.C.A, D.C.P;


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

An All-rounder
(No Transcript)
Guidance Lecture on Service Sector Management
  • T.Y.B.M.S. 5th Semester
  • 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.

Differences between
Sr. Physical Goods Services
1 Tangible Intangible
2. Homogenous Heterogeneous
3. Production Distribution ? Consumption Production, Distribution Consumption are simultaneous.
4. A thing An activity or process
5. Core Value Product In Factory Core Value Product In Interactions.
6. Customer does not participate in production Customer actively participates in production
7. Can be STOCKED Cannot be STOCKED
8. Transfer of OWNERSHIP No Transfer of OWNERSHIP
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

A Goods-Service Continuum / Tangibility Spectrum
  • Services sector thrives at the expense of other
  • Services sector is labour intensive.
  • Services industries are Cottage and Low Paying
  • People require products before service.
  • In service sector services are only offered by
    the government sector.

How Important is the Service Sector in Our
  • The size of the service sector is increasing in
    almost all economies around the world
  • Services make up the bulk of todays 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
  • small businesses Page No. 13

Changing Structure of Employment as Economic
Development Evolves
Page No. 8
Share of Employment
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

  • It lays importance in the types of resources to
    be used how to manage the process.
  • It emphasizes the analysis of nature of service

For Profit Public Sector Banks, Hotels, Airlines
Non- Profit Police, Fire Dept., Postal Old Age Homes, Charities
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
  • B. Service tangibility
  • Highly tangible vending machines,
  • 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,

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 NGOs, 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,
  • 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,
  • 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

Major Trends in Service Sector
  • Government Policies (e.g., regulations, trade
  • 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
  • An economic activity that does not result in
  • 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

Distinguishing Characteristics of Services
  • Customers do not obtain ownership of services
  • Intangible elements dominate value creation
  • Greater involvement of customers in production
  • Other people may form part of product experience
  • Greater variability in operational inputs and
  • Many services are difficult for customers to
  • Service products are ephemeral and cannot be
  • 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
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
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 doesnt a customer hesitate to pay a higher
price for a McDonalds 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
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
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
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 tie-ups. 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
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
Right Person at Right Time for Right Work with
Right Cost Right pace.
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
lawyers 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
? Physical environment ? Modes and content of
communication ? Price of the service ? Appearance
and conduct of service personnel, ? Tangible
elements accompanying service ? Brand
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
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
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
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
Quality excellence. Recognized only through
Quality is precise and measurable
Quality lies in the eyes of the beholder
Quality is conformance to the firms developed
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
  • raise profits to invest in service innovation
  • May impact service experience (must avoid
  • 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 Cs
  • Courtesy
  • Confidentiality
  • Credibility
  • Communication
  • Customer Knowledge
  • Contact
  • Competence
  • Concern
  • Consistency

Seven Service Quality Gaps
Gap 1 Not knowing what Customers Expect
Gap 2 Not Selecting the Right Service Designs
Gap 3 Not Delivering to Service Standards
Gap 4 Mismatch Between Promises and Performance
Page No. 189
Prescriptions for Closing Service Quality Gaps
  • Knowledge Learn what customers Expect--conduct
    research, dialogue, feedback
  • Standards Specify SQ standards that reflect
  • Delivery Ensure service performance matches
    specs--consider roles of employees, equipment,
  • 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
  • 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
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
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
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 error-free. 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.
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
  • 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 Internal Examination
60 Marks External examination
20 M Projects, Presentations,
Behavior, Attendance etc.
20 M Class Test
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