ROLE OF SERVICES IN AN ECONOMY

Welcome to Service Marketing Management

LEARNING OBJECTIVES

Describe the central role of services in an economy.

Discuss the evolution of an economy from an agrarian society to a service society.

Describe the features of preindustrial, industrial, and postindustrial societies.

Describe the features of the new service economy

HOW WOULD ONE DEFINE A SERVICE SECTOR?

A service is any activity or benefit that one party can offer to another which is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product. Kotler, Armstrong, Saunders and

Wong (1999)

HOW WOULD ONE DEFINE A SERVICE SECTOR?

… services … anything that cannot be dropped on your foot. The Economist

Services are economic activities that create value and provide benefits for customers at specific times and places as a result of bringing about a desired change in – or on behalf of – the recipient of the service. Christopher Lovelock

HOW WOULD ONE DEFINE A SERVICE SECTOR?

Services are production of essentially intangible benefits and experience, either alone or as part of a tangible product, through some form of exchange, with the intention of satisfying the needs, wants and desires of the consumers.

SERVICE DEFINITIONS

Services are deeds, processes, and performances.

Valarie Zeithaml & Mary Jo Bitner

A service is a time-perishable, intangible experience performed for a customer acting in the role of a co-producer.

James Fitzsimmons

DEFINITION OF SERVICE FIRMS

Service enterprises are organizations that facilitate the production and distribution of goods, support other firms in meeting their goals, and add value to our personal lives.

James Fitzsimmons

ROLE OF SERVICES IN AN ECONOMY

PERCENT SERVICE EMPLOYMENT FOR SELECTED NATIONS

Country 1980 1987 1993 2000

United States 67.1 71.0 74.374.2

Canada 67.2 70.8 74.8 74.1

Israel 63.3 66.0 68.0 73.9

Japan 54.5 58.8 59.972.7

France 56.9 63.6 66.470.8

Italy 48.7 57.7 60.2 62.8

Brazil 46.2 50.0 51.9 56.5

China 13.1 17.8 21.2 40.6

India 40.99 42.25 45.62 51.16

TRENDS IN U.S. EMPLOYMENT BY SECTOR

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Service

Manufacturing

Agriculture

SERVICE SECTOR OF INDIAN ECONOMY

contributes to around 55 percent of India's GDP during 2006-07. This sector plays a leading role in the economy of India, and contributes to around 68.6 percent of the overall average growth in GDP between 2002-03 and 2006-07.

SERVICES

Information Technology (the most leading service sectors in Indian economy)

IT-enabled services (ITeS) Telecommunications Financial Services Community Services Hotels and Restaurants

STAGES OF ECONOMIC DEVELOPMENT

Pre- Use of Standard dominant human Unit of of living Society Game activity labor social life measure Structure Technology

Pre- Against Agriculture Raw Extended Sub- Routine Simple hand Industrial Nature Mining muscle household sistence Traditional tools power Authoritative

Industrial Against Goods Machine Individual Quantity Bureaucratic Machines fabricated production tending of goods Hierarchical nature Post- Among Services Artistic Community Quality of Inter- Information industrial Persons Creative life in terms dependent Intellectual of health, Global education, recreation

THE NEW EXPERIENCE ECONOMY

Economy Agrarian Industrial Service Experience

Function Extract Make Deliver Stage

Nature Fungible Tangible Intangible Memorable

Attribute Natural Standardized Customized Personal

Method of supply

Stored in bulk

Inventoried Delivered on demand

Revealed over time

Seller

Trader

Manufacturer

Provider

Stager

Buyer

Market

User

Client

Guest

THE FOUR REALMS OF AN EXPERIENCE

Customer Participation

Passive Active

Environmental

Absorption Entertainment (Movie)

Education (Language)

Relationship Immersion Esthetic (Tourist)

Escapist (ScubaDiving)

EXPERIENCE DESIGN PRINCIPLES

Theme the Experience (Forum shops) Harmonize Impressions with Positive

Cues(O’Hare airport parking garage)

Eliminate Negative Cues(Cinemark talking trash containers)

Mix in Memorabilia (Hard Rock T-shirts)

THEME THE EXPERIENCE (FORUM SHOPS)

THEME THE EXPERIENCE (FORUM SHOPS)

THEME THE EXPERIENCE (FORUM SHOPS)

THEME THE EXPERIENCE (FORUM SHOPS)

IMPRESSIONS WITH POSITIVE CUES (O’HARE AIRPORT PARKING GARAGE)

MIX IN MEMORABILIA

SOURCE OF SERVICE SECTOR GROWTH Innovation

Push theory (e.g. Post-it)Pull theory (e.g. Cash Management)Services derived from products (Video Rental)Information driven servicesDifficulty of testing service prototypes

Social Trends Aging of the populationTwo-income familiesGrowth in number of single peopleHome as sanctuary

DISCUSSION TOPICS

Illustrate how the type of work he or she does influences a person’s lifestyle. For example, contrast a farmer, a factory worker, and a school teacher.

Is it possible for an economy to be based entirely on services?

What is the value of self-service in an economy?

INTERACTIVE CLASS EXERCISE

The class breaks into small groups. Each group identifies service firms that should be listed in the top Fortune 100 and places them in rank order of estimated annual revenue.

http://money.cnn.com/magazines/fortune/fortune500/2010/full_list/