Marketing Of Services-1 Chapter No.1 Service Economy
ChapterIntroduction to Services 1 What is service economy? Why services marketing? Reasons for growth of service economy: Characteristics of Services Compared to Goods:
Service Economy “In a service economy a largeproportion of the working population is employed not in agriculture andmanufacturing but in service jobs. In service economies too a large proportion of output is provided by the service sector.”
Historical Background of service economy: Till second world war most of the developed economies(Like UK,USA, Australia, Germany) were considered as the service oriented economies.
What Economists and Marketers Say aboutService Economy……Fuchs Wrote in 1968: The United States has become theworld’s first Service Economy during the period followed byWorld War II, first nation in which half of the population isinvolved in intangible services other than food automobiles,houses ,cloth etcSmith narrated in 1972:To measure and interpret serviceoutput we should identify weaknesses in the statisticaltreatment of services.Heilbroner: The growth of services increases the possibilityof Govt interference in the market mechanism towards aplanned economic system on order to maintain essentialservices.
Factors Influencing Service Economy (Specifically UK) Services And Employment Services And Output Services And Consumption Services And balance of payments
1.Services And Employment :Economic Activities are divided into three classes: Primary: (Agriculture, forestry fishing) Secondary: (Manufacturing & Construction Industries) Tertiary: (Services & Distributive Trades)
2.Services And Output:Service output are measured on the basis of Service Quality and Service quantityUnreliability is the factor which involves increased difficulty level of measuring the actual output of services
3.Services and consumption Changing life patterns Moving to hold convenience life. Devices with extra services As consumption level of people for products increase it will provoke the people to go for effective use of services .
4.Services and Balance of PaymentsFundsCurrency rateRegulation of economic activities……
Reasons for growth of service economy The lag in growth in labor productivity in services. Growth in intermediate demand from firms. Growth in final demand from consumers
A…The lag in growth in labor productivity in services. A greater decline in hours worked per MAN IN SERVICE than in INDUSRTY. A more rapid increase in the quality of labour in industry than in service. A difference in the physical capital per worker available in industry compared with service. More rapid technological change in industry than in service ,that industry benefited more from scale economies
B…Growth in intermediate demand from Firms: Intermediate demand from firms means creating or filling the need of inputs provided to manufacturing and other sectors of economy. Depending on intermediate demand firms are divided into three categories:
CONTD….. Specialists Firms:Set up to provide services previously carried out by existing firms.e.g: Engineering services, personnel services. Alternatively Specialists Firms:Set up to provide new services. e.g :data processing. Business Buyers:They use services like :accounting,construction,banking,insurance,legal,resear ch,advertising,publicrelations,training,shipping,cons ultancy services.
Analysis:Companies and other organizations rely on specialist services as it is the need of the day to take hold on technological and competitive pressure with lack of available resources organizations encourage to useoutside services other than internally based services.
C…Growth in Final demand from Consumers: As societies get wealthier people generate final demands to ordinary and l uxorious services. According to Law of Economies:“As societies get wealthier and as the marginal utility derived from additional increments of goods decline then people turn to services expenditures.” It tells us about the relationship between income &spending patterns on goods & services. (travel,health,recreation,education,with changing lifestyles.
??????????????? We will discuss post industrial society as it is based on services:
Transformation of Industrial to Post Industrial Society: First Stage:Industry develops by expansion of transportation and of public utilities with increasing use of energy with non manufacturing blue collar forces. Second Stage:It involves mass consumption of goods and services with increasing population and changing trends to whole sale and retail in term of finance, real estate and insurance.
CONTD…….Third Stage: A German Statistician Christian Engel said:“The proportion of money devoted to food at home begins to drop and the marginal increments are used first for durables and then for luxury and recreation.”Personal services begin to grow as restaurants,hotels,autoservices,travel entertainment ,sports need for technical accessories etc.
Contributions of Service Industries to U.S. Gross Domestic Product
Examples of Service Industries Health Care hospital, medical practice, dentistry, eye care Professional Services accounting, legal, architectural Financial Services banking, investment advising, insurance Hospitality restaurant, hotel/motel Catering, Entertainment & recreational Travel airline, travel agency, theme park Others hair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design, Communication
Why study Services Marketing? Service-based economies Service as a business imperative in manufacturing and IT Deregulated industries and professional service needs Service equals profits Services marketing is different
Challenges for Services Defining and improving quality Designing and testing new services Communicating and maintaining a consistent image Accommodating fluctuating demand Motivating and sustaining employee commitment Coordinating marketing, operations, and human resource efforts Setting prices Finding a balance between standardization versus personalization Ensuring the delivery of consistent quality
Impact of Service Economy on Marketing: Marketers trend to make investments on use of services. Market search requires area and economy wise marketing Which economy is more rich in which services To explore new services for changing patterns of economy.
ASSIGNMENT………(Marks /10)TASK: Select ONE country. Analyze its SERVICE CONTRIBUTION PERCENTAGE in its GDP. Make a PIE CHART of the country’s service contribution in different sectors of its economy. Conclude which service sector has the highest contribution in GDP of the selected country.
HOW TO SUBMIT Assignment…… Written Report of not more than 3 pages Presentation to be made in MS PowerPoint. Two students should be in one group. Report = 5 marks Presentation = 5 marks.