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Services and the
Economy
Services Marketing
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Services Economy
Economy dominated by the services sector/industry
The term Service Economy also known as Functional Economy is usedto refer to the relative significance of service attached to a productoffered by a company.
IBM is an unique example. In spite of being a manufacturing company ittends to call itself a services company. This has been the scenario since itrealized that the price elasticity of demand for business solutions is lesselastic than for hardware. The company now benefits from the revenue ofthe elongated contracts rather than receiving payment in a single mode.
The service sector accounts for a significant portion of GDP in mostcountries.
Highest levels of employment in 2009 has been in the FinancialServices, Healthcare, IT, real estate, hospitality.
The services sector is the largest and the fastest growing componentof most economies
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Service Sector & Economy
Makes direct and significant contribution to GDP & job creation
Helps stimulate the economy Growth & development of Nation The most evident example in India is the growth of the IT & IT
enabled services creating jobs, contributing to the GDP andoverall growth
Strong growth in Internet/ICT related service providers has
contributed to the rapid growth of an increasingly sophisticatedrange of innovative service products.
Services Economy technology has allowed service industries togain the operational leverage that manufacturing achieved 100years ago.
Companies like GE, IBM, HP are moving towards a more servicesoriented business when they were and are still known as productcompanies.
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Role of Services in the economy
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42%6433
31.4Germany
37%2611
632.1Bangladesh
19%2010
701.6Nigeria
45%6728
52.2Japan
64%6921
102.4Russia
61%6614
203.0Brazil
34%391
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453.5Indonesia
23%7623
15.1U.S.
35%2317
6014.4India
142%2922
4925.7China
40yr ServiceGrowth
S%
G%
A%
Labor%
Nation
Worlds Large Labor ForcesA = Agriculture, G = Goods, S = Service
20092009
CIA Handbook, International Labor Organization
Note: Pakistan, Vietnam, and Mexico now larger LF than Germany
Shift to service jobs
(A) Agriculture:Value fromharvesting nature
(G) Goods:Value frommaking products
(S) Service:Value from enhancing thecapabilities of things and their ability
to interconnect and create value
Role of Services in the economy
% Wage andSalary
Employmentby Industry
Sector, 2006
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Economic Statistics
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India
India is the second fastest growing economy in the world. IndiasGDP has touched US$1.25 trillion or 2% of the world economy
Services are the major source of economic growth, accountingfor more than half of India's output with less than one third ofits labor force.
3.50%
5.40%
4.40%
6.40%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
19 60- '8 0 1 98 0- '9 0 199 0- '00 2 000- '09
Growth Rate
Growth of GDP
32%
20%17%
27% 26%29%
41%
54% 54%
0%
10%
20%
30%
40%
50%
60%
1990-'91 2005-'06 2007-'08
Agriculture Industry Service Sector
Contribution of Various Sectors
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Economic Statistics - Services
Trade
WW exports of services was US$ 102 billion in 08-09 a12.5% increase over last years
In 1980 the service sector accounted for 20% of WW GNPwhich now accounts for over 60%
India's large service industry accounts for 55% of thecountry's Gross Domestic Product (GDP) while the industrialand agricultural sector contribute 28% and 17% respectively
Employment
Growth of the IT services sector has created tremendousemployment opportunities,
The growing number of educational institutions,entertainment industry, Banks and financial institutions
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Evolution of Services Marketing
Marketing as corporate function was not used until the year 1958. Fromthen till now, marketing has evolved from to market into market to i.emanagement of customers and markets and is evolving into market withie. collaboration btw companies, customers, supply chain, and competitionto produce and sustain value.
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1950s 1960s 1970s 1980s
Consumer Goodscompanies wererecognized as themost sophisticatedmarketers
Industrial Markets andmarketing specific toindustries
Marketing in nonprofit organizationand areas of publicsector
The size and growthof services sectordemanded attention
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Evolution of Services Marketing
Stage1
Stage 2
Stage 3
Stage4
Stage5
Stage6
Stage7
Selling
Advertising & Communications
Product Development
Differentiation & Competitor Analysis
Customer Service
Service Quality
Integration & Relationship marketing
Not all service firms go through these steps
Competitive imitation as there is no patent protection
Advantages from product development is short lived
Capitalize on data-based marketing techniques
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Stage1 Stage 2 Stage 3 Stage4 Stage5 Stage6 Stage7
Evolution of Services Marketing
Components
Outcomes
Selling
SalesProgramme
Recruitnewcustomers
Focus onsales notprofits
Noemphasisoncustomersatisfaction
Increased
Ads
Ad agencies,PR etc
Promotionalenticements
Highcustomerexpectation
Outputs noteasilymeasurable
Competitive
Imitation
Introduction
of newServices
Emphasis ondevelopmentprocess
CompetitiveImitation
Establishmentof brands
Analysis
Positioning
MR
Marketingtraining
Improved
branding
Sophisticatedsegmentation
Low onprofitability
Notsupportedby process
Lack ofdifferentiati
on
CustomerServicetraining
Smilecampaign
Front officelayout
Quality gapidentification
Customercontribution
Customerresearch
Marketingplanning
Customerretention notemphasized
Regularcustomerresearch
Integratinmarketingplans
Balancedmarketingactivity
customerretention
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ServicesMission & Vision
is an opportunity to define a business at the most basic level Provides direction and definition to business, Ensures focusand consistency, Provides meaning to the work people do Simplifies decision making outlining what is acceptable &what is not should answer 3 fundamentals where, what and how of thebusiness
Mission
Vision
takes into account the current status of the organization, andserves to point the direction of where the organization wishes
to go Is not about what the company currently is, but what thecompany hopes to become.
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Developing a Services Mission
OrganizationalPhilosophy
Product MarketDomain (scope of
the org)
Critical SuccessFactors (in the
industry it operates)
OrganizationalKey Values (for the
employees)
We want to be themost preferredairline on earth
We are going tocompete in theluxury segment ofthe air travelmarket
We want ourpeople to be
dedicated andexceptionallycommitted to
customer service
We want to be
excellent inpersonalizationand in flightentertainment
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Examples Mission Statement
At IBM, we strive to lead in the invention, development and
manufacture of the industry's most advanced informationtechnologies, including computer systems, software, storagesystems and microelectronics.
We translate these advanced technologies into value for ourcustomers through our professional solutions, services andconsulting businesses worldwide.
McDonald's vision is to be the world's best quick servicerestaurant experience. Being the best means providingoutstanding quality, service, cleanliness, and value, so that we
make every customer in every restaurant smile.
FedEx Corporation will produce superior financial returns for itsshareowners by providing high value-added logistics,transportation and related information services through focusedoperating companies. Customer requirements will be met in the
highest quality manner appropriate to each market segmentserved.
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Assignment 1
Identify two service organizations with missionstatements and elaborate their mission with inthe context of the four areas we discussed today
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