Unit 1: Introduction to service marketing

Chapter outline
A. Role of service in modern economy
B. Marketing challenges of service
C. Service marketing environment
D. Goods v/s service marketing
E. Goods service continuum
F. Consumer behavior
G. Service marketing triangle
H. Classification of services
Format for answering
10 mks 3 pages
5 mks 1-1.5 pages






University exam questions
Concepts (3 mks)

1. Intangibility and inseparability in services
2. Goods and Services Continuum
3. Consumer behavior
4. Service marketing trinity/triangle
5. Service encounter
6. Zone of tolerance
7. Buying roles
8. Perishability of services
9. Credence quality
10. Convergence
11. Heterogeneity
12. Service guarantee

Answers (10 mks)
1. Do you think classification of services can help in developing the marketing mix? How?
2. It is said that service marketing is different from product marketing. Explain the elements of service
marketing mix with reference to hospitals.
3. Explain the distinctive characteristics of services and its implication
4. Describe the factors stimulating growth in services


Definition of Services
A service is any act of performance that one party can offer 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 Philip Kotler
Services are deeds, processes and performances. Here, deeds are actions of the service
providers, processes are the steps in the provision of service and performance is the customers
understanding of how the service has been delivered - Zeithaml & Bitner



A. Role of service in modern economy
a) Significance of services
b) Growth of service sector
c) Role of services in modern economy
Services are going to move in this decade to being the front edge of the industry Louis Gerstner, 2001,
IBMs former CEO
The growth of services is directly proportional with the growth of the economy. It is observed without
exceptions that as a country progresses, the contribution of services in the GDP increases. The following
figures prove this point
Japan the most developed country in Asia gets more than 72% of its GDP from services. Even China with
its focus on manufacturing the services contribution stands at more than 43%. India with maximum
number of people engaged in agriculture, services contribute more than 58% in GDP and ranks 10 in the
world in terms of service contribution to GDP(Asia development bank, 2014). US with more than 78%
services contribution and UK with 76% prove the importance of services in the economy (Indian union
budget document 2012-2013)
The role of services in Indian economy can be highlighted by the following economic indicators
FDI inflow in services stood at USD 39,400 million during the period of April 2000 Feb 2014.
Indias share of service sector exports stood at 3.3% in 2011, up from 0.6% in 1990.
Employment 25% in 2010, 68% in urban India

The following aspects are responsible for growth of services in India
Upward trend in disposable income - More disposable income indicates more spending in
services. The real household disposable income has doubled since 1985
Changing lifestyle the lifestyles have come to change with more spending attitude as
supposed to more savings in previous generations. The lifestyles have become more outgoing
and concepts like grooming, fashion, convenience have gained importance, thereby increasing
demand for services.
Increasing specialization With changing lifestyles the increase in demand for specialized
services has given rise to many service ideas. For instance there are specialized services like car
spa, designer garments, nail spa, priority banking services etc
Increasing literacy rates Higher literacy rates indicate more aware consumers, better job
prospects, more demanding customers. In India literacy rates have increased from about 15% in
1950 to 74% in 2011 and the contribution of services have also increased in the same period
highlighting a directly proportional relationship
Increase in government activities Government activities like MGNREGA, Right to education
etc results in better infrastructure and higher disposable incomes.
Greater life expectancy Greater life expectancy indicates higher spends on health care apart
from other industries as more life means more usage of services. India has progressed from a
life expectancy of 41.38 years in 1960 to 66.21 years in 2012.
Changing social patters With family patterns and social circles changing, the consumption
patterns also changes, thereby increasing the needs for more service products. The traditional
joint family systems are now replaced with Nuclear families, DINKS, Working women, single
child etc.
Cultural change Culture is an embodiment of values, knowledge, traditions, habits and
behavior that passes from one generation to other, its not static and in modern times has
become more open minded and inclusive. This leads to celebration of other cultures and there
by increases spending on services. For ex celebration of Diwali, Christmas and Ed by all
communities.
Increase in new product launches Companies regularly launch new products to cater to
specific needs and the life products and services are shrinking. Every new service attracts more
people meaning more revenue. Ex TATA Owned Indian Hotels Company ltd (IHCL) recently
launched Ginger chain in the budget hotels category apart from the existing Taj group that
caters to the luxury segment.
Technology penetration more technology penetration enables smoother functioning of
services, access to larger audience and customer convenience. The booming to e-commerce has
give a push to many services. Internet penetration in India is 16%, 243 million more that US 207
million, second largest internet base after china (300 mln), 82 mln active fb users, more than
50% access internet through cell phones
Young population India is set to become the youngest country by 2020, today every 3 Indian is
a youth. Young people being open to more services with a more disposable income are a boon
to the sector.
Revenue to government A major role that services play in an economy is to contribute to
Government through taxes. In 2010-11 the government collected Rs 71,390 crs in service tax
that formed 9% of total government revenue.

Conclusion Services play a pivotal role in a countrys economy, as it is evident in the facts quoted
above. As India is touted to be the next super power, it will have to focus on providing great
infrastructure and support to services. There are steps already taken in this direction, for instance PM
Narendra Modis pet project GIFT city in Gujarat is all set to create 10 lakh jobs in the coming years in
the financial services industry.