Unit 1

Subject: Management of Services

Presented By:
Dr. Sanjay Manocha
 Contents
 Service Sector of India
 Role of service sector in Indian economy
 Meaning, definition of services
 Difference between goods and services
 Characteristics of services and their marketing implications
 4 Is of Services
 Service marketing triangle
 Service encounter
 Classification of Services
 Reasons for the growth of service sector

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Service Sector of India
Introduction
 The service sector, also called tertiary sector, is the third of the three economic sectors.
 The other two are the primary sector, which covers areas such
as farming, mining and fishing; and the secondary sector which covers
manufacturing and making things.

 The service sector provides a service, not an actual product that could be held in your
hand.
 Activities in the service sector include retail, banks, hotels, estate, education,
health, socialwork, computer services, recreation, media, communications, electricity,
gas and water supply.
 The service sector is an important part of the economy.
 For example, in Australia in 2007, 85% of all businesses were in the service sector. In
2009 there were more than nine million people employed in the service sector in
Australia, which was 86% of all jobs.

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Service Sector of India
Introduction
 In India, there has been a huge growth in service sector businesses which made up 52%
of India's GDP in 2014-15. Computer software businesses in India are increasing at a rate
of 35% per year.
 Increasingly service sector businesses focus on what is now being called the “knowledge
economy”.
 They need to keep ahead of other businesses by understanding what it is their customers
want and be in a position to give it to them quickly and at low cost.
 One good example of this are banks which went through big changes in the late 20th
century. Using information and communication technology, banks have vastly reduced
the number of people they need to employ, and lowered the cost of providing bank
service.
 For example, an automated is able to provide basic banking services 24 hours a day, 7
days a week, in many different places. Before this, banking services were only available
from the bank when it was open. Many banks and building societies have joined together
to form much lower cost businesses that can make more money from a wider customer
base.
 The key to this process is gaining information about their customers and constantly
coming up with new services for them.
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Service Sector of India

 The services sector is not only the dominant sector in India’s GDP, but has also attracted
significant foreign investment flows, contributed significantly to exports as well as
provided large-scale employment. India’s services sector covers a wide variety of
activities such as trade, hotel and restaurants, transport, storage and communication,
financing, insurance, real estate, business services, community, social and personal
services, and services associated with construction.

Market Size
 The services sector is the key driver of India’s economic growth. The sector has
contributed 54.17 per cent of India’s Gross Value Added at current price in 2018-19*.
Net service exports stood at US$ 60.25 billion in April-December 2018 (P).
 Nikkei India Services Purchasing Managers' Index (PMI) stood at 52.5 in February 2019.
The expansion in services activity was driven by boost in capacity and demand along
with favourable public policies.

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Service Sector of India
 Investments
 Some of the developments and major investments by companies in the services sector in the recent
past are as follows:
 Leisure and business travel and tourism spending are expected to increase to US$ 234.4 billion and
US$ 12.9 billion in 2018, respectively.
 India’s earnings from medical tourism could exceed US$ 9 billion by 2020.
 Indian healthcare companies are entering into merger and acquisitions with domestic and foreign
companies to drive growth and gain new markets.

Government Initiatives
 The Government of India recognises the importance of promoting growth in services sectors and
provides several incentives in wide variety of sectors such as health care, tourism, education,
engineering, communications, transportation, information technology, banking, finance,
management, among others.
 The Government of India has adopted a few initiatives in the recent past. Some of these are as
follows:
 Under the Mid-Term Review of Foreign Trade Policy (2015-20), the Central Government increased
incentives provided under Services Exports from India Scheme (SEIS) by two per cent.
 Government of India is working to remove many trade barriers to services and tabled a draft legal
text on Trade Facilitation in Services to the WTO in 2017.

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Service Sector of India
Achievements

 Following are the achievements of the government in the past four years:
 India’s rank jumped to 24 in 2018 from 137 in 2014 on World Bank’s Ease of doing
business - "Getting Electricity" ranking.
 Five times more growth in major ports’ traffic between 2014-18, compared to 2010-14.
 Six-fold increase in Government spending on telecommunications infrastructure and
services in the country – from Rs 9,900 crores (US$ 1.41 billion) during 2009-14 to Rs
60,000 crores (US$ 8.55 billion) (actual + planned) during 2014-19.
 A total of 11 projects worth Rs 824.80 crore (US$ 127.98 million) were sanctioned under
the Swadesh Darshan scheme.
 Highest ever revenue was generated by Indian IT firms at US$ 167 billion in 2017-18

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Service Sector of India
Road Ahead
 Services sector growth is governed by both domestic and global
factors. The Indian facilities management market is expected to
grow at 17 per cent CAGR between 2015 and 2020 and surpass the
US$19 billion mark supported by booming real estate, retail, and
hospitality sectors.
 The implementation of the Goods and Services Tax (GST) has
created a common national market and reduced the overall tax
burden on goods. It is expected to reduce costs in the long run on
account of availability of GST input credit, which will result in the
reduction in prices of services.

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9
The service sector
 The services sector has been growing at a
rate of 8% per annum in recent years
 More than half of our GDP is accounted for
from the services sector
 This sector dominates with the best jobs,
best talent and best incomes

10
“There are no such thing as service industries. There
are only industries whose service components are
greater or less than those of other industries.
Everybody is in service.”

-Theodore Levitt-
 The world economy nowadays is increasingly
characterized as a service economy.
 This is primarily due to the increasing importance and
share of the service sector in the economies of most
developed and developing countries.
 Economic history tells us that all developing nations have
invariably experienced a shift from agriculture to
industry and then to the service sector as the main stay of the
economy of a country’s economic progress.
 This shift has also brought about a change in the
definition of goods and services themselves.
 No longer are goods considered separate from
services.
 Rather, services now increasingly represent an
integral part of the product and this interconnectedness of goods
and services is represented on a goods-services continuum.

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 Three sectors of Indian
economy
 Primary Sector:
When the economic activity depends mainly on exploitation of natural
resources then that activity comes under the primary sector.
Agriculture and agriculture related activities are the primary sectors of
economy.
 Secondary Sector:
When the main activity involves manufacturing then it is the
secondary sector. All industrial production where physical goods are
produced come under the secondary sector.
 Tertiary Sector:
When the activity involves providing intangible goods like services
then this is part of the tertiary sector. Financial services, management
consultancy, telephony and IT are good examples of service sector.

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Evolution of an Economy from Primary
Sector Based to Tertiary Sector
Based
 During early civilization all economic activity was in
primary sector.
 When the food production became surplus people’s need
for other products increased. This led to the development
of secondary sector.
 After growth of previous two economic activities a
support system was the need to facilitate the industrial
activity. Certain sectors like transport and finance play
an important role in supporting the industrial activity,
more shops became need and then ultimately, other
services like tuition, administrative support developed.
These all came under tertiary sector.
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 Interdependency of economic sectors
(An example of cold drink)
 A cold drink contains water, sugar and artificial flavor.
 Suppose if there is no sugarcane production then procuring sugar will
become difficult and costly for the cold drink manufacturer.
 Now to transport sugarcane to sugar mills and sugar to the cold drink plant
needs the services of a transporter. A person or system of persons is
required to maintain and monitor all these movements of goods from farm
to factory to shop in different locations. That is where role of administrative
staffs comes.
 Let us go back to the farmer. He also needs fertilizers and seeds which is
processed in some factory and which will be delivered to his doorstep by
some means of transportation.
 To top it all, at every step of these activities we require the proper monetary
and banking system.
 So, in a nutshell this describes how interrelated all sectors of an economy
are. 16
Services : Definition
 A type of economic activity that is intangible, is
not stored and does not result in ownership. A
service is consumed at the point of sale. Services
are one of the two key components of economics,
the other being goods. Examples of services
include the transfer of goods, such as the postal
service delivering mail, and the use of expertise
or experience, such as a person visiting a doctor.

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 Service sector activities
The services sector covers a wide array of activities:

 Services provided by the most sophisticated sectors like

telecommunications, satellite mapping, and computer software.
 Simple services like those performed by the barber, the carpenter, and
the plumber.
 Highly capital-intensive activities like civil aviation and shipping.
 Employment-oriented activities like tourism, real estate, and housing.
 Infrastructure-related activities like railways, roadways, and ports
 Social sector- related activities like health and education.

Thus, there is no one-size–fits- all definition of services resulting in some

overlapping and some borderline inclusions.

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Service sectors mainly
includes
(a) Trade
(b) Hotels and restaurants
(c) Transport including tourist assistance activities as well as
activities of travel agencies and tour operators
(d) Storage and communication
(e) Banking and insurance
(f) Real estate and ownership of dwellings
(g) Business services including accounting; software development; data
processing services; business and management consultancy;
architectural, engineering and other technical consultancy;
advertisement and other business services
(h) Public administration and defence
(i) Other services including education, medical and health, religious and
other community services, legal services, recreation and
entertainment services
(j) Personal care services .
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Services
 Represent a heterogeneous group of activities
and has now become a prominent sector in the
economies of most developed and developing
countries, in terms of its contribution to
national income, trade flows and foreign
direct investment

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Structure of Services in Indian
Economy
 With the development of the economy, the contribution of
service sector in national income or gross domestic
product GDP has been growing progressively. The
sectoral dis-aggregation of national income shows that the
service sector has been growing relatively faster than
other two sectors - primary and secondary throughout the
post independence period of the Indian economy.
 Sectoral growth analysis of 2012-2013 indicates decline
in all the segments. On year-on-year basis, agriculture and
allied sector increased by 1.2% in Q2 (3.1% in Q2 of
2011-12); industry 2.8% (3.7%) and services 7.2%
(8.8%).

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 GLOBALIZATION in service sector
 The term globalization means international
integration.
 Opening up of world trade, development of
advanced means of communication,
internationalization of financial markets,
growing importance of MNC's, population
migrations and more generally increased
mobility of persons, goods, capital, data and
ideas.

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 The impact of globalisation has been highly positive
in almost all spheres of economic and social life and
virtually very less negative effect.
 India's economic growth has been high, exports have
boomed, incidence of poverty has been reduced,
employment has surged, begging by India for
economic aid has minimized, long-term inflation rate
has gone down, scarcity of goods have disappeared,
the quality of products available have improved
substantially and overall India has become
progressively vibrant and internationally
competitive.

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 Service sector is the lifeline for the social economic
growth of a country.
 The real reason for the growth of the service sector is
due to the increase in urbanization, privatization and
more demand for intermediate and final consumer
services. This scenario is a direct result of
Globalization.
 After 1991, when globalization prominently entered
India, service sector experienced a sudden boom.
 In advanced economies the growth in the primary and
secondary sectors are directly dependent on the growth
of services like banking, insurance, trade, commerce,
entertainment, etc.
 Service sector is also a major contributor of national
income and employment in recent days.

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 Role of FDI in Service
Sector
 FDI can play catalytic role in a growing economy like
India. The role of FDI is becoming increasingly
significant in the Indian economy. The service sector in
India has tremendous growth potential and as a result it
attracts huge FDI. The top subsectors attracting FDI
inflows include service sector.

 The Computer Software and Hardware enjoy the

permission of 100% FDI under automatic route.

 The limit of FDI in Telecom sector was increased from

49% to 74%.
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 FDI Growth in various Service Sectors:

 The share of services in FDI inflows increases to

48.4%.

 If the shares of some other services like Hotels,

tourism, trading, information and broadcasting,
consultancy services, agricultural services, ports,
retail trading etc are included then the total share of
cumulative FDI inflows to the service sector would
be 58.4%.

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27
28
Contribution of service
sector in employment
 Labor market outcomes are critical to economic
policy evaluation. Growth of jobs, earnings, job
quality in terms of worker status like regular work or
casual or self employment and the access to social
security benefits tell us much about the wellbeing of
workforce in an economy.
 India’s experience appeared to be different with the
share of services sector in GDP sharply going up in
the 1990s, beginning with a share of 43% 1990-91, to
reach a high share of 57% in 2009-10.

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 India skipped the traditional sequence and the service-
sector assumed the role of the lead sector in India’s
growth path.
 In this scenario labor shifting out of agriculture got
directly absorbed in services rather than in
manufacturing. These labors got educated and trained to
enter the field of services.
 Mostly skilled and educated labor forces are absorbed in
this sector that comes mainly from urban India.
 In the decade of 2001-2011 the population of urban India
grew by 2.76% per annum and its share of total
population increased to 31.1 per cent in 2011 from 27.8
per cent in 2001.

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 While analyzing the urban sector we pay particular
attention to the following sectors: Manufacturing
and Services.
 These two categories together have an employment
share of 81% in total urban employment.
 The service sector output has grown rapidly since
1990 and by 2005 the share of services in GDP had
reached well above the international norm (that
corresponds to the average share of services in
countries with similar per capita GDP).

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 Estimates based on National Accounts Statistics
(NAS) data indicate that, the service-sector has
clocked an average annual compound growth rate
of 8.7 % per annum between 1999-2000 and 2009-
10, as against 7.7% achieved by manufacturing
during the same period.
 Within the service-sector the group transport, storage
and communications has grown the fastest at 11.8 %.
 Followed by trade and hotels at 8.5% and other
business services at 7.9%

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 What is a service?
 The Service Industries Journal defines “Service as any primary or
complimentary activity that does not directly produce a physical product,
that is, non goods part of transaction between buyer (customer) and
seller(provider)”.
 “A service is an activity or benefit that one party can offer to another that 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 and
Armstrong (1991).
 In practice, it can be difficult to distinguish services from goods, for when a
good is purchased there is usually an element of service included. Similarly, a
service is frequently augmented by a tangible product attached to the service.
In this way, a car may be considered to be a good rather than a
service, yet cars are usually sold with the benefit of considerable
intangible service elements, such as warranty or financing facility.
On the other hand, a seemingly intangible service, such as a package
holiday includes tangible elements in the purchase-use of an aircraft, a
transfer coach and a hotel room. In between is a wide range of outputs
that are a combination of tangible goods and intangible service.
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 What is a service?
 The American Marketing Association defines
services as - “Activities, benefits and satisfactions
which are offered for sale or are provided in
connection with the sale of goods.”
 It is intangible.
 It does not result in ownership.
 It may or may not be attached with a physical
product
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35
36
Types of Services
 Core Services: A service that is the
primary purpose of the transaction. Eg: a
haircut or the services of lawyer or teacher.
 Supplementary Services: Services that are
rendered as a corollary to the sale of a
tangible product. Eg: Home delivery
options offered by restaurants above a
minimum bill value.
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 Difference between product and service
Product Service
1. Product is a physical good 1. Service is an action
2. Product can be inventoried 2. Service cannot be inventoried
3. Product are homogeneous 3. Services are heterogeneous
4. Product can be readily 4. Service cannot be readily
displayed on shelf displayed on shelf
5. Product is produced and 5. Service is produced and consumed
consumed at d/f time at same time
6. Customer participation does 6. Customer participation affect
not affect transaction. service transaction.
7. Employees does not affect the 7. Employees does not affect the
product outcome service outcome
8. Mass production is easy 8. Mass production is difficult
9. Product can be returned or 9. Service cannot be returned or
resold resold
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Difference between product and service
Product Service
10. There is sure knowledge that the 10. There is no sure knowledge that
product delivered matches what the service delivered matches
was planned and promoted. what was planned and promoted.
11. Employees involved in producing 11. Employees involved in producing
product is not a matter of service is a matter of concern for
concern for customers. customers.
12. Product quality depends on 12. Service quality depends on many
controllable factor. uncontrollable factor.
13. Transfer of ownership takes place 13. Transfer of ownership does not
take place

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Difference between physical
goods and services
Physical goods Services

tangible intangible

homogeneous heterogeneous

Production and distribution are Production, distribution and

separated from consumption consumption are simultaneous
processes
A thing An activity or process

Core value processed in factory Core value produced in the buyer-seller

interaction
Customers do not participate in the Customers participate in production
production process
Can be kept in stock Cannot be kept in stock

Transfer of ownership No transfer of ownership

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 Most products have a service
component
They could be
 Equipment based
 People based – varying skill levels

41
 Services could meet
 Personal needs – haircuts, tution, massage
parlours
 Business needs – courier services, office
cleaning services, delivering fresh flowers

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Characteristics of services
 Intangibility
 Services are intangible and do not have a physical
existence.
 Hence services cannot be touched, held, tasted or smelt.
 This is most defining feature of a service and that which
primarily differentiates it from a product.
 Also, it poses a unique challenge to those engaged in
marketing a service as they need to attach tangible
attributes to an otherwise intangible offering.

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 Tangibility Spectrum

Source: G. Lynn Shostack, “Breaking free from Product

Marketing”, Journal of Marketing 41(April 1977), pp73-80
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Characteristics of services
 Inseparability
 Services are produced and consumed at the same time,
unlike goods which may be manufactured, then stored for
later distribution.
 This means that the service provider becomes an integral
part of the service itself.
 The waitress in the restaurant, or the cashier in the bank, is an
inseparable part of the service offering.
 The client also participates to some extent in the service, and can
affect the outcome of the service.
 People can be part of the service itself, and this can be an
advantage for services marketers.

45
Characteristics of services
 Perishability
 It implies that unlike goods, services cannot be stored but have to be
transacted during the given time. If the transaction cannot take place,
then the service offer loses its value.
 Service revenue can never be recovered with the hope of future sales.
There is the element of opportunity cost.
 Unused capacity cannot be stored for future use.
 Therefore an empty seat on a plane, for example, is a lost
opportunity forever, it cannot be transferred to the next flight.
 and query-free times at the reference desk cannot be saved up
until there is a busy period.
 The movie show in a Cinema theatre starts at 12 noon. It has 600
seats but has managed only 500 of them. If the movie has to start
on time, the cinema theatre can never recover the lost revenue
from the 100 unsold seats.

46
 Characteristics of services
 Variability
 Services involve people, and people are all different.
 The service offer is never consistent in its quality and delivery. The same
service product is never delivered in the same way to the same customer
across two different time periods; a customer perceives the service
transaction as having a different quality when delivered from different
places.
 This is so unlike goods, where the customer is convinced that the product
that he buys is the same- irrespective of where he has purchased it and
whom he has purchased from.
 The Dove soap that Mrs. Sharma buys from her retailer in Mumbai
would be the same if she bought it in Chennai during her business trip.
Thus, while there is homogenity or some kind of standardization in the
product features of goods, a service offer lacks them.
 It is important to minimize the differences in performance (through
training, standard-setting and quality assurance).
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Characteristics of services
 Non-ownership
 The final distinguishing feature of a service is that, unlike
a physical product, the consumer does not secure
ownership of the service.
 Rather the customer pays only to secure access to or use
of the service.
 Again the hotel room is a good example.
 Similarly, with banking services, although the customer
may be given a Cheque book, credit cards, etc, they serve
only to allow the customer to make use of what he or she
is actually buying, namely, bank services.

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Intangibility
Product has three levels.
Customer
Service

Capabilities
After Features Warranty
Sales Brand Core
Name
Support Benefit
or Delivery
Packaging Service Quality/ and
Durability Credit
Design/
Installation Styling

Personnel
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Intangibility
Service has only two levels
Customer
Service

After
Warranty
Sales
Support Core
Benefit or
Service
Delivery and
Installation Credit

Personnel

2nd Level i.e. Tangible Level is missing!!!!!!!!!!

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 Intangibility
Marketing Implications

Create 2nd level – Tangibillize the intangibles

Strategies for Creating 2nd level

After
Warranty
Sales
1. Make the service person
Support or equipment based
2. Use of facts, figures and opinions
Delivery and
3. Use of technology
Installation Credit
4. Personalization of services
Personnel

51
 Intangibility
Strategies for Creating 2nd level
1.
2.
3.
Make the s ervice pers on or equipment bas ed
Us e of facts , figures and opinions
Us e of technology
4. Pers onalization of s ervices

5. Availability
6. Creating references
7. Stress on proper physical facilities
After
Warranty
Sales
8. Communication
Support material
9. Post purchase communications material- souvenirs, gifts,
Delivery and
thank you letters, suggestion forms
Installation Credit
10. Price and quality / level of service
Personnel

52
 Inseparability
Implications of Inseparability
The implications of both the provider and the consumer of the service having to
be present during the time and at the place of the service encounter is that the
marketing takes the form of an event management.
Its success would depend on the ability to bring the service provider and the
consumer under one roof, at the same time. Otherwise, the service transaction does
After
not take place. Sales Warranty
Support
There are ways to overcome Inseparability;
1. Training Of Internal Customers
Delivery and
•The service provider
Installation
with the help of his organisation should take extra
Creditquality
effort to train other service providers as trainees under an expert.
•The intention is to bring more service providers
Personnelof the same expertise in to the
market.
•Then the number of people who can be served at one time would be more.
53
 Inseparability
Implications of Inseparability
2. Video Conferencing
•Inseparability can be overcome but the service expert giving instructions through
video and satellite conferencing.
•Thus it is now very common to have a complicated surgery not only video taped
for reference and replay but also broadcast to medical colleges near and far.
•Expert opinions inAfter
medical and legal matters are sought and received through
Warranty
video and satelliteSales
equipment.
Support
•Teaching, business conference, intra-company meetings across world-wide
branches and economic leaders’ conclaves are taking advantage of this technology
to overcome inseparability. Delivery and
3. Robotics Installation Credit
Many intricate surgeries are now carried out with the help of robots.
Robots help to perform many general surgeries
including hysterectomies, colon operations, and
Personnel
even a one-cut gall-bladder removal.
And, doctors say the robot gives them a better,
more efficient way to move and see during these
intricate surgeries.
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Implications of Perishability
Perishability factor prevents a service provider from
storing his offers.
There are ways to overcome Perishability Fctor;

Over Marketing
After
Warranty
ManagingSales
demand
Support
Managing supply
Delivery and
Installation Credit

Personnel

55
Implications of Variability
Variability conveys to the customer an element of inconsistency and non-
standardisation in the service offer and service delivery.
The customer’s service encounters are different every time.
Example The next time you go into a restaurant watch how people are
served. You may find that one member of staff acts different from
another. For instance, one may genuinely smile, another may not.
After
However, it may Sales Warranty
be the smile that turns first customer into repeat
customer. Support
Taking the example above, heterogeneity of service can assist an
organisation in terms of customer retention, revenue generation and
competitive advantage. Much of these is dependent on theDelivery
culture and
of the
Installation
organisation, and this is often driven by senior management.Credit
The service marketer can try to achieve greater
standardization in several ways; Personnel
Increase Control over the service, Switch from People
to Machines, Reduce perceived risk
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4 Is of Services

Presented By:
Dr. Sanjay Manocha
Services have four major characteristics that greatly affect the marketing programs.

1. Intangibility:

Unlike products, services cannot be held, touched, or seen before the purchase decision thus,
they should be made tangible to a certain extent. Marketers should “tangibilize the
intangible” to communicate service nature and quality. This can be done through:
After
Warranty
Sales
 Environment
Support
 Uniforms

 Paperwork
Delivery and
Installation Credit
 Brochures

Personnel
Insurance is a guarantee against risk and neither the risk nor the guarantee is tangible.
Hence, insurance rightly come under services, which are intangible. Efforts have been made
by the insurance companies to make insurance tangible to some extent by including letters
and forms
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2. Inconsistency:
Service quality is often inconsistent. This is because service
personnel have different capabilities, which vary in performance
from day to day.
This problem of inconsistency in service quality can be reduced
through standardization,
After training and mechanization.
Warranty
Sales
In insurance Support
sector, all agents should be trained to bring about
consistency in providing service or, the insurance process should be
mechanized to a certain extent. Delivery and
Installation
Eg: the customers can be reminded about the paymentCredit
of premium
through e-mails and sms instead of agents.
Personnel

59
•3. Inseparability:

Services are produced and consumed simultaneously.

•Consumers cannot and do not separate the deliverer of the service from the service
itself.
•Interaction between consumer and the service provider varies based on whether
consumer must be physically present to receive the service.
After
Warranty
Sales
Support
In insurance sector too, the service is produced when the agent convinces the
consumer to buy the policy and it is said to be consumed when the claim is settled
and the policyholder gets the money.
Delivery and
Installation Credit
•In both the above cases, it is essential for the service provider (agent) and the
consumer (policy holder) to be present.
Personnel

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4. Inventory:

No inventory can be maintained for services.

Inventory carrying costs are more subjective and lead to idle production capacity.
When the service is available but there is no demand, cost rises as, cost of paying
the people and overhead remains constant even though the people are not required
to provide services due to lack of demand.
After
Warranty
Sales
In the insuranceSupport
sector however, commission is paid to the agents on each policy
that they sell.
Hence, not much inventory cost is wasted on idle inventory. As the cost of agents is
Delivery and
directly proportionate to the policy sold.
Installation Credit

Personnel

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Service marketing triangle

Presented By:
Dr. Sanjay Manocha

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Service Marketing Triangle Service marketing triangle a dynamic
model where there are three interlinked groups that work together to
develop, promote, and deliver services. These key players are labeled on
the points of the triangle – Company, Customer and
Providers(employees)

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Service Encounter

Presented By:
Dr. Sanjay Manocha
Service Encounter
 The extent of direct interaction between a service provider and its customers
in the Service Delivery process is referred to as service encounters or
“moments of truth” or “critical incidents” (Carlzon, 1987; Czepiel, Solomon,
and Surprenant, 1985).
 A service encounter is any direct interaction between a service provider and
customers and may take varying forms. For example, a bank customer
wishing to make account inquiries may choose between an interaction with
an ATM or over the Internet, or with a bank employee by telephone, letter, or
face to face in a branch.

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Service Encounter
 From the customer’s point of view, the most vivid impression of service
occurs in the service encounters or “Moment Of Truth,” when the
customer interacts with the service firm. This is the foundation to
“Satisfaction of Service Quality” — it is where the promises are kept or
broken. The concept of service encounter was put forth by Richard Norman,
taking the metaphor from Bull Fighting. Most services are results of social
acts, which take place in direct contact between the customer and the service
provider. At this stage the customer realizes the perceived service quality.

 Every “Moment of Truth” is Important — according to Scandinavian

Airlines, each one of their 10 million customers come in contact with 5
employees. Thus the airlines say there 50 million moments of truth — each
one is managed well and “They prove they are the BEST”.

 https://www.youtube.com/watch?v=wNmJWay_hX0
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 Types of Service Encounters
 A service encounter occurs every time a customer
interacts with the service organization.
 There are three general types of service encounters –
 remote encounters, phone encounters, and face-to-face
encounters.
 A customer may experience any of these types of service
encounters, or a combination of all three in his/her
relations with a service firm.

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Remote Encounter:
 Encounter can occur without any direct human contact is called as Remote
Encounters.
 Such as, when a customer interacts with a bank through the ATM system, or
with a mail-order service through automated dial-in ordering.
 Remote encounters also occur when the firm sends its billing statements or
communicates others types of information to customers by mail.
 Although there is no direct human contact in these remote encounters, each
represents an opportunity for a firm to reinforce or establish perceptions in
the customer.
 In remote encounter the tangible evidence of the service and the quality of
the technical process and system become the primary bases for judging
quality.
 Services are being delivered through technology, particularly with the
advent of Internet applications.
 Retail purchases, airline ticketing, repair and maintenance troubleshooting,
and package and shipment tracking are just a few examples of services
available via the Internet.
 All of these types of service encounters can be considered remote encounters. 78
Phone Encounter:
 In many organizations, the most frequent type of encounter between a
customer and the firm occurs over the telephone is called as phone encounter.
 Almost all firms (whether goods manufacturers or service businesses) rely
on phone encounters in the form of customer-service, general inquiry, or
order-taking functions.
 The judgment of quality in phone encounters is different from remote
encounters because there is greater potential variability in the interaction.
 Tone of voice, employee knowledge, and effectiveness/efficiency in
handling customer issues become important criteria for judging quality in
these encounters.

 Organisations such as insurance, telecom department will use this.

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Face-to-Face Encounter:
 A third type of encounter is the one that occurs between an employee and a customer
in direct contact is called as Face-to-Face Encounter.
 In a hotel, face—to—face encounters occurs between customers and maintenance
personnel, receptionist, bellboy, food and beverage servers and others.
 Determining and understanding service equality issues in face—to—face context
is the most complex of all.
 Both verbal and non-verbal behaviors are important determinants of quality, as are
tangible cues such as employee dress and other symbols of service (equipment’s,
informational brochures, physical settings).
 In face—to—face encounters the customer also play an important role in creating
quality service for herself through his/her own behavior during the interaction.
 For example, at Disney theme parks, face-to-face encounters occur between
customer and ticket-takers, maintenance personnel, actors in Disney character
costumes, ride personnel, food and beverage servers, and others. For a company such
as, IBM, in a business-to-business setting direct encounters occur between the
business customers and salespeople, delivery personnel, maintenance representatives,
and professional consultants.

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The importance of encounters:

 If a customer is interacting with a firm for the first time, the initial encounter
will create a first impression of the organization.
 Even when the customer has had multiple interactions with a firm, each
individual encounter is important in creating a image of high quality.
 A combination of positive and negative interactions will leave the customer
confused towards the firms quality.
 Not all encounters are important. There are certain key areas where it is
important to concentrate.

 Ex: In hotel-early encounter to visitors.

 In hospitals encounters with nurse is important.

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Classification of
Services

Presented BY
Dr. Sanjay Manocha
 Services
“Any activity or benefit that one party can
offer to another that is essentially intangible
& does not result in the ownership of
anything. It’s production may or may not be
tied up to a physical product.”
 Classification of Services
It is required to design & apply marketing techniques to
completely satisfy the customer & increase profits & identify
new emerging services.
Classifications can be done on following basis:
•Nature of Service Act
•Classification by Industry
• Type of Relationship that the Service Organization has with its
Customers
• Scope for Customization and Judgment on the part of the Service
Provider
•Nature of Demand and Supply for the Service
•Method of Service Delivery
•Skills of the service Provider
•Goals of the Service Provider
•Degree of Regulation
• Labor intensiveness (People-based/Equipment-based)
Nature of Service Act

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 Classification By
Industry
a. Entertainment industry
b. Education
c. Telecommunications
d. Finance & Insurance
e. Transportation
f. Public utilities
g. Government services
h. Health
i. Hospitability Industry
j. Business services
k. Telecommunications
l. Trading
Type of Relationship that the Service
Organization has with its Customers
Scope for Customization and Judgment on the
part of the Service Provider
Nature of Demand and Supply for the
Service
Method of Service Delivery
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Reasons For Growth Of
Services
The growth of service industries can be traced to the economic
development of society and the socio-cultural changes that have
accompanied it.
Changing environmental forces brought out of the services in forefront
of the economy.
Those environmental forces separately or in combination create new
type of service.
The following environmental factors are responsible to make a new
service.

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Economic changes:
The demand for communication, travel and information services
has increased due to globalization.

This has been filled by the rapid changes brought about by new
information technology.

Increased specialization within the economy has led to reliance on

specialist service providers

For e.g. advertising and marketing research have

now become specialist functions providing support to all the sectors of
the economy.

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Economic affluence
One, of the key factors for the growth of demand for services is the
economic affluence .
Due to the fast rise in the income of consumers, they are attracted
towards the new areas like clubs, health clubs, domestic services, travel
and tourism, entertainment, banking, investment, retailing, insurance,
repairs, etc. and these are growing much faster than ever before.
The size of the middle income consumer is raising fast and the
percentage of the very poor household’s declining.
The rural households in the upper income category are growing at a much
faster pace than the urban households in the corresponding categories.
The Economic liberalization Process has had a positive impact on the
Indian households.
Their income as well as their expenditure has been pushed, creating a
demand for many goods and services.
There is a significant change in the pattern of family expenditure.

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Changing Role of Women
Traditionally the Indian woman was confined to household activities.
But with the changing time there has been a change in the traditional way
of thinking in the society.
Women are now allowed to work. During the recent times a large
number of women have come up in a variety of professions.
They are employed in defense services, police services, postal
services, software services, health services, hospital services,
entertainment industries, Business Process Outsourcing and so on.
The percentage of working women has been growing rapidly.
The changing role of women has created a market for a number of
product and services.
Earning women prefer to hire services in order to minimize the
innumerable roles that they are required to perform.
The demand by woman is forcing service organizations to be more
innovative in their approach. 100
 Cultural Changes
Change is the underlying philosophy of culture place of change in Indian
culture is not uniform.
However, during the last century the factors of change are prominent.
The emergence of the nuclear family system in place of the traditional
joint family system creates a demand for a host of services like education,
health care, entertainment, telecommunication, transport, tourism and so
on.
There has’ been a marked change in the thought Processes relating to
investment, leisure time perception and so on which has created a huge
demand for services.

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 I.T. Revolution
For the last 15 years in India IT became one of the key service businesses of the
country.
India has the largest software skilled population in the world.
The domestic market as well as the international market has grown substantially.
Realizing the potential for this area many state governments have made IT as their
most, prioritized segment states such as Karnataka, Andhra Pradesh, Madhya
Pradesh Maharashtra and Delhi have already achieved substantial progress in
Information Technology
The growth of population, industrialization and indiscriminate consumptions have
affected the, natural resources, environment and the ecological balance.
Due to this there is an imbalance of the ecology various service organizations have
been promoted in order to take up social marketing.
Thousands of crores of rupees are being spent on safeguarding the rare animals
and birds, water pollution, conservation of oil & energy and research to develop
new technologies that can promote effective use of natural resources and safeguard
the environment.
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 Leisure time:
People do get some time to travel and holiday, and therefore,
there is a need for travel agencies, resorts, hotels and
entertainment.
There are others who would like to utilise this time to improve
their career prospects, and therefore, there is a need for adult
education, distance learning, part time courses, etc.

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 Product innovations:
 In the changing time the consumers have become more
conscious of quality than cost.
They need high quality goods at par with international
standards.
Having this in mind the manufacturers have focused their
attention on quality improvement, innovations, etc.
In this process many more services have emerged on account
of product innovation.
Some of them are servicing services, repairs, computer, training
and development, education, etc.

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 Product complexity:
A large number of products are now being purchased
in households which can be serviced only by
specialised persons e.g. water purifiers, microwave
oven, computers, etc., giving rise to the need for
services.
The growing product complexities create greater
demand for skilled specialists to provide maintenance
for these complex products and brings out other
services like expert advise, consultancy services, etc.

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 Development of Markets
During the last few decades the wholesaler and the retailer population has
grown in the country.
Urban India has become a cluster of wholesaling and retailing business. In
the Semi – urban areas, retailing has spread to the nooks and corners of the
streets and in the rural areas retail business is significantly present.
A new breed of organizations, offering marketing services has come up.
The government also offers marketing services to the small-scale agricultural
farmers, artisans and other traditional business sectors such ‘as promotion of
regulated markets, export promotion councils, development boards etc

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Market orientation
The changing competitive situation and demand supply positions has
forced the manufacturing organization to shift their philosophy from
production orientation to market orientation.

Market is a service function that has been added in the organization. The
pressures in the market has further forced the manufacturing organizations
to have marketing research, accounting, auditing, financial management,
human resource management and marketing research divisions – all of
which are services functions.

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 New young youth:
Every new generation has its own characteristics and enjoys a different
life style.

There is a lot of difference between the generations in respect to their

living conditions/ styles, maturity, thinking, attitudes, behaviour, beliefs,
satisfactions, performance values and so on.

Today’s generation with all these changes provide more opportunities

to services like entertainment, fast food, computers, travel, picnic resorts,
educational institution, counselling, retailing, etc.

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Greater life expectancy
According to the World Development Report and World Human
Resource Index, the life expectancy of people has increased significantly
all over the world barring few developing countries.
It may be due to the advancement in the medical technology, and greater
awareness about health and education.
The increased life expectancy is the result of the consciousness of the
people regarding the health issues.
The growth of fitness clubs, diagnostic centers, medical counseling, and
health-related information sites are the reflections of the growing demands
for health care services.
The government as well as the social organizations has taken up the
mass campaigns in order to create awareness among the illiterate
persons and the rural population on health service.
Hence, the growth of health related services.

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Economic liberalization
The economic liberalization of the 1991 has brought many changes in
the Indian scenario.
With the Disinvestment and the Privatization policies the state owned
monopolies in many service areas came to an end Multinationals were
permitted to enter the Indian market.
Liberal lending policies and lower interest rates motivated many people
to become self-employed.
Different sectors like Banking, Insurance, Power projects,
Telecommunication, Hospitality sector, Health Services, Entertainment,
Air transport, and Courier services witnessed intense competition, due to
the entry of multinationals.
The flow of time-tested service technology from various parts of the
world changed the attitude of the Indian consumer towards sources.

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Resource scarcity and ecology:
As the natural resources are depleting and need for
conservation is increasing, we have seen the coming up of
service providers like pollution control agencies, car pools,
water management, etc.

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Rampant migration
One of the important reasons for the growth of services in India is
the rampant migration of rural to semi-urban and urban areas.

Migration to urban areas for the want of jobs and livelihood has
resulted in the expansion of cities and townships due to which
businesses like real estates, rentals, transportation and
infrastructure services are rapidly expanding.

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Export potential
India is considered to be a Potential source for services.

There are a number of services that India offers to various parts of the
world like banking, insurance, transportation co data services,
accounting services, construction labor, designing, entertainment,
education, health services, software services and tourism.

Tourism and software services are among the major foreign exchange
earners of the country and that the growth rate is also very high as
compared to the other sectors

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Corporate crowd:
The phenomena of globalisation, privatisation and
liberalisation coupled with faster urbanization have
created the corporate world crowd and its support services.

This crowd is responsible in bringing the new

services, and redefining the old ones.

 The services like hotels and restaurants, banking,

insurance, travel and tourism, advertising, airlines,
courier services, marketing research, health care, legal
services, etc. will emerge and flourish more and more. 114
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