CHAPTER 2

AN OVERVIEW OF THE SERVICES SECTOR

HIGHLIGHTS1. Nine “supersectors” of services

2. Service classifications scheme

3. Services success factors

OUTCOMEUnderstand the dynamism of services marketing

Evaluate performance criteria of services firms

Identify the success predictors of services firms, what firms can learn from each other

DYNAMISM OF SERVICE ECONOMY

“Soft parts” of the economy

One of the three main categories of a developed economy; services, industrial & agricultural

Agriculture Industrial Services

THE NINE SERVICES“SUPERSECTORS”

1. Wholesale & Retail Trade

2. Transportation, Warehousing & Utilities

3. Information

4. Financial Activities

5. Professional & Business Services

6. Education & Health Services

7. Leisure & Hospitality

8. Government

9. Other Services

Service Sector Related Activities Employment

Projection

Wholesale & RetailWholesale TradeRetail Trade

Sales to businessesSales to individuals

+11.3%+13.8%

Transportation,Warehousing & UtilitiesTransportation & WarehousingUtilities

Transportation & storage includes air, rail, water, road and pipelineProviding electricity, gas, water & sewage removal

+21.7%

-5.7%

Information Produce & distribute information andcultural products as well as means to transmit these products and/or process data

+18.5%

Service Sector Related Activities Employment

Projection

Financial ActivitiesFinance & Insurance

Real Estate, Rental & Leasing

Engaging in financial transactions including pooling of risksSelling or allowing the use of assets

+12.3%

+12.3%

Professional & Business ServicesProfessional, Scientific & Technical

Management of Companies

Administrative & Support

Legal, accounting, architectural, engineering, computer services, consulting, healthcare & researchDecision-making role in the company

Routine support activities for other organizations

All +30.4%

Education & Health Provide instruction, training & medic care +31.8%

Service Sector Related Activities Employment

Projection

GovernmentPublic Administration

Federal, state & statutory bodies +0.4%

Leisure & HospitalityArts, Entertainment & Recreation

Accommodation & Food Services

Providing services to meet cultural, entertainment & recreational interests

Accommodations & food service establishments

All +17.8%

Other Services Including repair, personnel care, dating, grantmaking, advocacy, pet services and parking

+15.7%

SERVICE CLASSIFICATIONS SCHEME

How services firms can learn one another:

1. Understanding the nature of service

2. Relationships with customers

3. Customization & judgment in service delivery

4. Nature of demand & supply

5. Method of service delivery

UNDERSTANDING THE NATURE OF SERVICE

Tangible or intangible action?

Direct recipient; a person or thing?

UNDERSTANDING THE NATURE OF SERVICE

Nature of Service Action

People Things

Tangible Actions Services directed at people’s bodies:•Healthcare•Passenger transportation•Beauty salons•Restaurants•Haircutting

Services directed at goods & physical possessions:•Freight transportation•Industrial repair•Laundry & dry cleaning•Landscaping•Veterinary care•Janitorial services

Intangible Actions Services directed at people’s mind:•Education•Broadcasting•IT•Theaters

Services directed at intangible assets:•Banking•Insurance•Accounting•Legal services

Who or What is the Direct Recipients of the Service?

RELATIONSHIPS WITH CUSTOMERS

Is delivery continuous or discrete?

Does it have a membership or no formal relationship?

RELATIONSHIPS WITH CUSTOMERS

Nature of Service Delivery “Membership” Relationship

No Formal Relationship

Continuous Delivery of Service

•Insurance•Telephone subscription•College enrollment•Banking•Malaysian Automobile Assc.

•Radio station•Police protection•Lighthouse•Public highway

Discrete Transactions •IID phone calls•Theater series subscription•Commuter ticket/monthly pass

•Car rental•Mail service•Toll highway•Pay phone•Movie theater•Public transportation•Restaurant

Type of Relationship Between Services Firms & Customers

CUSTOMIZATION Vs. JUDGMENTIs meeting customer needs high or low?

Is the extent of service customization high or low?

CUSTOMIZATION Vs. JUDGMENT

Meeting Individual Customer Needs

High Low

High •Legal services•Healthcare/surgery•Architectural design•Executive search firm•Real-estate agency•Beautician•Plumber•Education (tutorials)

•Education (large classes)•Preventive health programs

Low •Telephone service•Hotel services•Retail banking•High-end restaurant

•Public transportation•Routine appliance repair•Fast-food restaurant•Movie theater•Spectator sports

Extent to Which Service Characteristics Are Customized

NATURE OF DEMAND & SUPPLYCan peak demand be met regularly or does peak demand regularly exceed capacity?

NATURE OF DEMAND & SUPPLY

Extent to Which Supply Is Constrained

Wide Narrow

Peak Demand Can Usually Be Met Without Delay

•Electricity•Natural gas•Telephone•Hospital maternity unit•Police & fire emergencies

•Insurance•Legal services•Banking•Laundry & dry cleaning

Peak Demand Regularly Exceeds Capacity

•Accounting & tax preparation•Passenger transportation•Hotels & motels•Restaurants•Theaters

Services similar to those above but that have insufficient capacity for their base level of business

Extent of Demand Fluctuations Over Time

METHOD OF SERVICE DELIVERYNature of interaction between customer & service organization?

Is it available at a single site or multiple sites?

METHOD OF SERVICE DELIVERY

Nature of Interaction Between Customer & Services

Firms

Single Site Multiple Site

Customer goes to service organization

•Theater•Barbershop

•Bus service•Fast-food chain

Service organization comes to customer

•Lawn care service•Pest control service•Taxi

•Mail delivery•MAA emergency repairs

Customer & service transact from a distance (mail or electronically)

•Credit –card providers•Local TV station

•Broadcast network•Telephone company

Availability of Service Outlets

SUCCESS FACTORS OF SERVICES FIRMS1. Impact of information technology

2. Outservicing of services

3. Socio-cultural influences

IMPACT OF INFORMATION TECHNOLOGY

Rise of e-service

Improved efficiency

OUTSERVICING OF SERVICESOffshoring: the migration of domestic jobs to foreign host countries

Outsourcing: the purchase & use of labor from a source outside the company

Industrialization: mechanized or automated services that replaced human labor with machines

SOCIO-CULTURAL INFLUENCESA graying demographic

Young vs. Old

Generic vs. specific demand pattern

Ex: emergence of “WOOFs (Well-off-older folks)”

CONCLUSIONService, a sector of constant growth & dynamism

Marketing should be approached through a different classification scheme

Success in marketing will depend on how we are able to mitigate economics, social & technological factors

THANK YOU