Introduction to Services

Presented By:
Sanoj Kumar
What is service?

“SERVICE IS ANY ACT OR

PERFORMANCE THAT ONE PARTY CAN
OFFER TO ANOTHER THAT IS
ESSENTIALLY INTANGIBLE AND DOES
NOT RESULT IN ANY OWNERSHIP”

-PHILIP KOTLER
Contd..
 4 features of services:

 A service is an act or performance that is offered by one party to

another

 It is intangible, i.e. it cannot been seen or touched

 It is delivered at specific times and places

 It is an economic activity, which creates value & provides benefits

to customers
 Understanding Services
 Individuals, businesses and other organizations use services every day:
 E.g. Turning on a light, mailing a letter, pizza delivery, dry
cleaning, riding a bus, education, banking, restaurant etc.

 But unfortunately, customers aren’t always happy with the quality /

value of services they receive:
 E.g. Mistakes in credit card bills, late service at restaurants,
waiting in line, rude service staff etc.

 Suppliers of services find it tough to make profits, or please customers,

or find skilled service staff… But there are some service providers who
know how to please customers, run a profitable and productive
business, and employ competent staff  SUCCESSFUL.
Differences between
Goods & Services
 FEATURE GOODS SERVICES
1. Nature It is a physical object. It is an act or performance.
2. Ownership Customers obtain ownership when Customers do not obtain ownership
they BUY a good. E.g. Car when they HIRE a service. E.g. Car
purchase. rental.

3. Tangibility Goods are tangible. Services are intangible.

4. Participation in Customers do not participate in Customers participate in production of
Production production of goods. E.g. Soap. services. E.g. hairdressing.

5. Other People Other people do not form part of a Other people may form part of a
good. E.g. Salt. service – service providers or other
customers. E.g. Delhi Metro.

6. Standardization Standardization or consistency can Standardization or consistency cannot

be maintained in goods. E.g. One be maintained in services. E.g. Your
piece of Liril soap is the same as experience at a bank today may not be
another piece. same as next time’s.

7. Inventory You can keep inventory of a good, You cannot keep inventory of a
i.e. you can store it to use later. E.g. service, i.e. you cannot store it. E.g.
matchboxes. your banker’s services.
 FEATURE GOODS SERVICES
8. Ease of It is easy to evaluate a good, It is not easy to evaluate a service, as
Evaluation because it is higher in SEARCH it is higher in EXPERIENCE properties
properties (i.e. even before purchase (which you can judge only during
& usage, you know exactly what you usage, such as taste & smell at a
are looking for in a good – in terms of restaurant); and CREDENCE
shape, size, color, weight etc, such as properties (which you find tough to
soaps, handbags). evaluate even after you have used the
service, such as surgery and
investment advice).

9. Time Time factor is not important when Time factor is of great importance, as
providing goods to customers services are provided in REAL TIME
and people have constraints.

10. Delivery Delivery must be made physically. Delivery can also be made
E.g. When you buy clothes. electronically. E.g. Online banking.

11. Simultaneity of Production & consumption of goods A service is produced & consumed at
Production & happen at different times. the same time. E.g. Car washing.
Consumption
 Goods or Service?
 How do we determine whether the product is a GOODS
or a SERVICE?

 Sasser, Olsen and Wyckoff suggest that if more than

50% of the value of a product comes from the service
element, then it is a service.

 E.g. At a restaurant, say 20% of your bill value is of the

food; but the remaining 80% charge is for the
ambience, the attitude of waiters, the reception, the
cloakroom, the parking facility  thus this is a
SERVICE
 Intangibility of Services
 Philip Kotler has determined 5 categories of market offerings:

1. Pure tangible good. E.g. soap, salt.

2. Tangible good with accompanying minor services. E.g.

car, computer.

3. Hybrid. E.g. fast food restaurant.

4. Major service with accompanying minor goods. E.g.

hotel, airline.

5. Pure Service. E.g. psychotherapy, investment advice.

High
The Tangibility Graph
Salt
Cola
VCR
Car
Tailorin
gFurnitur
Elements
Tangible

e Fast Food
Restaurant
Plumbing
Lawn
Care House
Cleaning
Airline
Teaching
Psychother
Low

apy
Intangible
Low High
Elements
 The 8 P’s of Service Marketing
1. Product or performance.
2. Place & Time of delivery.
3. Promotion & education.
4. Price & other user costs like smell, noise etc.
5. People, i.e. service providers, other customers.
6. Process, i.e. sequence of actions in performing a service.
7. Physical evidence – visible cues that affect service evaluation.
8. Productivity (transformation of input to output) & quality (degree to
which the service satisfies the customer).
How Important is the Service Sector in
Our Economy?
 In most countries, services add more economic value
than agriculture, raw materials and manufacturing
combined
 In developed economies, employment is dominated
by service jobs and most new job growth comes from
services
 Jobs range from high-paid professionals and
technicians to minimum-wage positions
 Service organizations can be any size—from huge
global corporations to local small businesses
 Most activities by government agencies and nonprofit
organizations involve services
 Services dominate the United States Economy:
GDP by Industry, 2001

.
Agriculture, Forestry,
Mining, Construction 8% Finance, Insurance,
Real Estate
Manufacturing 14% 20%

Government Wholesale and

(mostly services) Retail Trade
13% 16%

Other Services 11% Transport, Utilities,

SERVICES Communications
Business Health 8%
Services 6%
5%
Thank you