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Service Industry I summary Y1Q2
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Summary of the Y2-Q2 course Service Industry I. This is a summary of the selected book pages for our course and the slides from classes.
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3Service industry summaryChapter 1 the nature of services
4 economic sectors:
1. Primary sector: farming, forestry, fishing
2. Secondary sector: industrial sector: gas, mining, manufacturing, electricity,
water, construction.
3. Tertiary sector: service sector.
4. (Quaternary sector: social / non-commercial services)
4 categories of services:
1. Distributive service: transportation, communication and trade.
2. Producer service: investment banking, insurance engineering, accounting,
bookkeeping, legal services.
3. Social service: health care, education, non-profit organizations, government
agencies.
4. Personal service: tourism, dry cleaning, recreational services and domestic
services.
Communistic countries are less developed in the service industry than western
countries.
The service sector has been growing at an annual rate of 8% in recent years.
Driving forces behind the growth of services:
- Increasing consumer incomes and sociological changes have led to increase
in demand for services.
- Increasing professionalism in companies, and technological changes have
brought about the creating of new services, notably of producer services.
Ernst Engel has made Engel’s Law in the 19 th century:
Ernst Engel found that as family income rises, the percentage spent on food
declines, the percentage spent on housing remains constant, and the percentage
spent on clothing, personal care, recreation, travel increases, and savings increases.
People with higher incomes tend to spend relatively more on services, and
less on goods.
Sociological change:
Families are having less free time and are therefore outsourcing many activities to
service providers.
‘Doing each other’s laundry’ phenomenon: higher % of women in the labour force
lead to a greater demand for day-care nurseries and maid services.
Demographical change:
Increasing life expectancy greying population. This leads to more demand for
nursing homes, health care services, and specialized travel agencies (all
professional industries).
,Legal advisers and income tax consultants have become necessary due to the
increasing complexity of life.
Technological progress has been an important factor in microelectronics and
telecommunications.
Service = process or act. An activity of an intangible nature that normally take place
in interactions between customers and service employees, and/or physical resources
and/or systems of the service provider, which are provided as solutions to customer
problems.
A service is an activity, benefit or satisfaction offered for sale that is essentially
intangible and does not result in the ownership of anything.
Services: all those economic activities that are intangible an imply an interaction to
be realised between service provider and consumer
Characteristics of services
Intangibility.
Simultaneity (inseparability)
Perishability.
Heterogeneity (variability)
Intangibility
services cannot be touched, tasted, smelt or seen before purchase. 3 categories
of qualities to evaluate:
1. Search quality. Attributes that a consumer can control prior to purchase (smell
perfume or fit clothes)
2. Experience quality. Attributes like taste and wearability that can only be
discerned after purchase/during consumption (hairdresser: you cannot
evaluate the quality before the haircut is done).
3. Credence (belief) quality. Attributes that are impossible to evaluate, even after
purchase/consumption. (when your car is fixed, you don’t have the ability
yourself to see if it is done in a right way).
Solution marketing strategist: making tangible the intangible.
(uniform looks professional and serious).
Servitization = practice whereby manufacturing firms extend their offerings by
including services.
Service companies go the opposite direction.
Simultaneity (inseparability)
Services are produced and consumed at the same time.
Pilot flies a plane at the same time passenger is transported.
Customer must be present at the place where the service is provided.
Services are place dependent.
The degree of overlap can vary from different services.
, For certain services (star restaurant) customers expect high quality service and are
interested in the person providing the service: they want a top-chef.
Heterogeneity (or variability)
Related to the potential of variability in the performance of services. 3 sources of
heterogeneity:
1. The service provider. People can make mistakes or be moody. ‘2 employees
can go through the same motions, do the same tasks, yet the service given
can be worlds apart’.
2. The customer. State of mind/personal situation of customer influences his
behavior and perception of service every customer will experience the
service differently.
3. The surroundings. External factors may influence customer’s perception of
service (visiting Disney on rainy vs sunny day). These factors are difficult to
control for the service provider.
Reduce the degree of variability:
Increase quality control (but simultaneity is difficult to prevent the service from
customer, because service is given at the same time as consumed).
Better planning of the service encounter (moment of interaction).
Downside: lack of personalization of offered service.
Perishability
Services cannot be stored for later sale or use.
If a plane leaves with empty seats, sales are lost forever.
Page 237-238 Kotler Principles of Marketing
Zooming in on the characteristics of services.
Pure, service with hybrid offer tangible good pure
Non-tangible,accompanying with equal parts accompanied tangible
Services minor goods of good and by one or more good
Services services
Service = any activity or benefit that one party can offer to another which is
essentially intangible and doesn’t result in ownership of anything! Examples:
Governments offer services like hospital, school, police
Non-profit organisations offer services like museums, charities, churches
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