The document discusses the nature and characteristics of services, how they have evolved over time, and various ways that services can be classified. It notes that services are intangible economic activities that produce utilities for customers in areas like time, place, form, and psychological benefits. The growth of the service sector is examined in the context of advancing technology freeing up labor from agriculture and manufacturing.

1. Service Sector in Our
Economy
What are services? Nature and
characteristics of services;
Evolution over services

2. What are services?
• Services are economic activities that
produce time, place, form, or
psychological utilities
Time: Maid in a household
Place: Warehousing
Form: Use of database to produce desired
‘form’( format, configuration)
Psychological: Entertainment

3. What are services?
Services are deeds, processes, or performances,
• Deeds: Tangible output- repairs, maintenance services,
consulting services, training, e-commerce applications,
web design, surgery,
• Processes: problem analysis activities, meetings with
client, follow up calls, reporting,
• Performances:
No tangible output- Encounters with customers,
consultations, medical examination, diagnosis
,interviews, teaching,
Intangible accompanied with with physical output-
restaurants, petrol stations, interior decorations

4. What are Services?
• 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 (such as
convenience, amusement, timeliness, comfort,
or health) that are essentially intangible
concerns of its first purchaser-----Zeithaml
• Customer service is the service provided in
support of a company’s core products. These
are free, whereas for services one has to pay.

5. Services as package of features
(Fitzsimmons and Fitzsimmons)
• Supporting facility; as physical resources;
must be in place before service is offered-
hospital infrastructure, labs.,
• Facilitating goods: product-service
combinations- medical supplies
• Explicit services- benefits which are
observable to the senses- cure of a patient, food
in a restaurant
• Implicit services- psychological benefits, can
be sensed vaguely, such as empathy,

6. What are Services?
With relation to goods, services can be an
end of a pole on a continuum
• Facilitating services: service which is
vital to operate goods, such as delivery of
petrol at petrol station
• Facilitating goods: goods which are vital
to use services, such as food in a hotel

7. Tangibility-Intangibility Continuum
• Petrol
• Automobiles
• Photocopier
• Car retailers
• Restaurants
• Health care
• Haircut
• Stress Counselling ,
taxation services
• 100% goods mfg.
• 80% goods
• 70%goods,
• 70% service
• 80%Service
• 90% service
• 100% service
• 100% service

8. Services and Human Society
Pre-industrial society:
• Major economic activity: Agriculture,
forestry, fishing, mining
• Technology: low; muscle power
• Occupation ; seasonal unskilled jobs
• Social base: Societal living
• Services: Money lending, personal and
household employment , trading,
bartering, military

9. Services and Human Society
Industrial society:
• Major economic activity: Processing,
manufacturing,
• Technology: power, machines, automation
• Occupation: Semi-skilled, technician
• Social base; Individual
• Services: Warehousing, transportation,
marketing, restaurants, banking, warfare

10. Services and Human Society
Postindustrial society:
• Major economic activity: Information and
knowledge, healthcare, recreation
• Technology: High professional skills, Research
and Development, Education
• Occupation: Services, Scientists, professionals
• Social base: Individualism
• Services: Trade, Finance, Real estate, Health,
Research, Insurance, Recreation

11. Classification of Services
• Customer perspective
• Customization and judgment
• Capital vs labour intensity
• Contact of Processor with customer

12. Customer perspective
• For Consumer (facilitating services):
Transportation, Communication, Finance,
Accommodation, Recreation
• To Consumer (human services)
People processing( diagnostic clinic, Mobile
X-ray)
People changing (university, hospital,
church, prison)

13. Customization and Judgment
• High judgment (skills by contact person):
1. High customization: family doctor, hair
dressing, tuition classes, piano lessons, driving
lessons
2. Low customization: Lecture in a class room,
guided tour
• Low judgment (skills by contact person):
1. High customization: Telephone service,
restaurant, hotel service, banking
2. Low customization: Bus service, theatre

14. Capital vs. Labour intensity
• Labour Intensive:
1. Professional: Doctors, solicitors, accountants
2. Skilled: mechanic, decorators, barbers
3. Unskilled: Postman, security guard, porter
• Equipment Intensive:
1. Skilled: Airlines, computer services,
2. Unskilled: Operators in Cinemas, petrol
stations, attendants,
3. Self-service: ATM’s, vending machines

15. Contact of Processor with
Customer
• High Contact: Pure service( Counselling,
medical care, tuitions, hair-cutting)
• High-medium Contact: Mixed service( bank,
insurance broker, legal advisor)
• Low –medium Contact: Quasi-mfg.(
Processing of insurance claims, distance
learning, production of films)
• Low Contact: Extractive/mfg.: car mfg. oil
refining
High contact is more difficult to design and control
and Low contact easier to design and control

16. Classification based on Service
providers
• Producer Services (Intermediate markets)
1. Financial services: banking, insurance
2. Shipping and distribution: ocean, rail,air
3. Professional and technical: design, legal
4. Other services: computer, postal, travel
• Consumer services (final market to citizen)
1.Retailing
2. Health care
3. Recreation
4. Education
5. Social services
6 Personal services-restaurants, repairs, laundry

17. Sectorial Clssification-
Murdick
• Retail and Wholesale services
• Non-profit services
• Producer services: Finance, Insurance, Real
estate, Business services, Legal services,
Membership organizations, Misc. professional
services
• Consumer services: Health care, Education,
Personal services, Car repairs, Hotel/motel/food
services, Leisure services, Private households

18. Classification on Types of Services
Primary: agriculture, animal husbandry,
mining,
Secondary; Goods production, processing,
Manufacturing
Tertiary: Transport, Recreation
Quaternary: Trade, finance, insurance, real
estate
Quinary: Health, education, research,
Government

19. Classification of Services as per
Macro-economy
1. Wholesale, Retail Trade, Restaurants,
and Hotels
2. Transport, Storage, and Communication
3. Finance, Insurance, Real Estate, and
Business Services
4. Community, Social, and Personal
Services

20. Reasons for growth of Services
• High productivity in agriculture and
manufacturing releases labour
• Regularity of jobs in industry and services
• High returns in trade, professions
• Increase in urbanization
• Preference for knowledge work against muscle
power
• Growth in individualism
Society progresses from agriculture to
industrial to service economy

21. Differentiating Characteristics:
Services: Intangibility
Advices, software instructions
• Cannot be seen
• Cannot be felt
• Cannot be tasted
• Cannot be touched

22. Implications of Intangibility
• Services cannot be owned
• Services cannot be inventoried or stocked
• Services cannot be displayed
• Services cannot be communicated
• Services cannot be packed
• Services cannot be transported
• Services cannot be patented
• Pricing is difficult

23. Heterogeneity or Variability
No two services are alike : Tailoring, saloons
• service as performance may differ from
person to person, hour to hour and day to
day;
• human transactions between customers
and employees vary; human emotions
vary at time of transactions
• Services for humans

24. Implications of Heterogeneity
• No standardization or consistency
• No surety of what is delivered matches
planning
• Quality cannot be controlled entirely by the
supplier
• Customer satisfaction depends on both
employee and customer actions
• Service delivery depends on both
employee and customer actions

25. Simultaneity or Inseparability
Simultaneous production and consumption-
food in a restaurant, diagnosis by a doctor
• Customer can be present while service is
being produced
• Customer has to be present when service
is delivered
• Customer interaction is essential

26. Implications of Simultaneity
• Mass production is difficult
• Customer presence affects the transaction
• Service providers find themselves playing
the role of product itself
• Decentralization becomes essential, as
economies of scale do not exist
• Locate the facility near to the customer
• Customers affect the nature of service
experience of other customers

27. Perishability
Seats on a flight, cinema, class lecture last
for a specified time
• Services cannot be saved
• Services cannot be stored
• Services cannot be resold
• Services cannot be returned

28. Implications of Perishability
• Difficult to synchronize supply and
demand
• Cannot take advantage of sudden high
demands
• Inability to carry inventory
• Demand forecasting is more important
• Recovery strategies when things go wrong
• Capacities are normally over booked to
ensure high utilization.

29. Easy to Imitate
• Banks, Business schools, Restaurants, Hotels,
Travel agencies, Airlines immediately copy
services offered by others.
• It is therefore difficult to gain competitive
advantage over others
• It is also not possible to obtain patents
• Advantages of being first to introduce ,therefore
do not exist as in tangible products

30. Pricing
• Tangible products are promoted through
trade discounts, payment discounts, bulk-
purchase discounts. But services have
limitations
• There are no set formulas to arrive at
service costs.
• There can be wide variations between the
fees charged by two solicitors or
advocates

31. Service Organization as a
System
• Organization: Defined by mission, strategies
and policies; to meet customer needs in the
environment
• Operations system: Designs the service
package and delivery system in cooperation with
marketing, finance, HR and runs the system to
produce services
• Marketing System: manages contacts with
customers, sales promotion, distribution and
market research, service delivery system

32. Service Organization as a
System
• Human Resources System: Selection,
hiring, training of service providers
• Feedback system: From the customers
and employees

33. Service as a Resource, Function,
Product
• Resource: Information, technology,
knowledge, wisdom-Intellect service
• Function: Design, maintenance, and
training
• Product: Software