Service and Service Sector - Term Paper Example

 Table of Contents Introduction 2 Service and its characteristics 2 Importance of Service Sector 4 Marketing challenges that services face 7 Conclusion 9 References 10 Introduction ‘Service’, one of the most widely used words in the business environment in the last few decades. In today’s competitive business scenario each and every organizations are trying to improve their services with the objective of staying ahead of competitors. There are some unique characteristics of service. Service is intangible, perishable and inseparable in nature. Organizations that provide various services such as financial, software etc. are part of service sector. Service sector plays an important role in the economy of a country. Marketing of service is quite different from the marketing of traditional tangible products because of its unique characteristics. In today’s economic environment each and every country give special attention to the service sector as the sector makes significant contribution to the GDP of the country’s economy. This paper is all about service and service sector. The report contains the details of the characteristics of the service, marketing mix of service and the key benefits of service sector. Service and its characteristics Services are not similar to the products. There are some unique characteristics that distinguish services from products. Intangibility, inseparability, perishability, heterogeneity and lack of ownership are some of the typical characteristics of a service. Each of these characteristics is explained below. Intangibility Unlike any product, a service is intangible in nature. Services cannot be tasted, seen, felt, or touched. As a result it becomes very difficult to compare and evaluate them. Customers of service actually purchase experiences (e.g. restaurant ambience, hotel environment), benefits and memories. Inseparability Services cannot be separated form its provider. When the receptionist of a hotel attending a customer or a restaurant boy is serving foods to its customers then the service is actually attached with them. This is why it is very important for the companies to hire the right candidate so that service is properly provided to the customers. Perishability Another crucial characteristic of service is that it is perishable. Services cannot be stored. In case of service production and consumption occur simultaneously. For example it is simply not possible to store an experience of taking diner at a three star restaurant and enjoy the same on the next day (Reisinger, 2009). Heterogeneity Services are provided by the people. Since two people cannot be same in terms of their attitude and behavior, services provided by them are also likely to be different. It is very much possible that a particular query will be answered differently by different people. However, this difference can be reduced through standard setting, training and proper quality assurance policy (Department of Information Studies, n.d.). Lack of ownership Consumers of any service are only able to access that service, but they cannot gain the ownership of the same. Transactions are made in order to access the service, not to own the service. Customers of a hotel enjoy the service of hotel boys, but they cannot own that service as they have to pay again to enjoy that service on the next day (Williams, 2002). Importance of Service Sector Service sector which includes important industries like financial, software, retail etc. has been playing a crucial role in the economies of most of the developed and developing countries over the last few years. The sector has generated huge amount of employment in various countries. Every year service sector makes significant contribution in the GDP of all the developed and developing economies. Like any other developed economy, UK economy is also dominated by the service sector. Insurance, banking and business services have played crucial role in the service sector. Till 2007 UK stock market was dominated by the financial services companies. During the period of 1996-2006 trade in services was found to be increased significantly. In 1996 total exports of services was little more than 50 billion euro, but in 2006 the figure reached to approximately 125 billion euro. With this sharp increase in exports, imports of services went down drastically in the stated period. Some of major drivers behind such rapid growth of service sector in the country are increasing purchasing power of consumers, increasing use of information and communication technology, influence of public sector and finally globalization (Mayo, n.d.). It has been found that at present almost 76.2% of total GDP of UK is contributed by the service sector of the country. In the recent period UK economy has seen one of its toughest times due to the arrival of global financial turmoil. The GDP of the country was found to be shrinking as the service sector was not performing well. However, according to a recent publication of BBC News, service sector has already started to grow once again and it is expected that this will again put the UK economy on the growth track. The growth of UK economy in the last three months is found to be 0.3%. This is more than what was previously expected. One of the main reasons behind such significant performance is the growth of country’s service sector which is found to be 0.5% during the period of October to December (BBC News, 3 March 2010). As far as employment is concerned service sector is the largest employer is the country. In 2004 1.04 million jobs were created by service sector in London and this was almost 24% of total employment in the city. In 2006, financial sector alone created almost 325,000 jobs in London and this figure is expected to reach at 380,000 by 2026. As far as business service is concerned, there were almost 457,000 people working in business service sector in 1971 and by 2004 the figure increased to 1.07 million. It is expected that 1.70 million people in London will be working in business service sector by 2026 (Prothero, 2007). It has been observed that there is a common trend in the economies of almost all the developed countries. This common trend is that previously these economies were ‘manufacturing’ based and now they are ‘service’ based. Over the past two-three decades this trend of shifting from manufacturing to service has also been found in case of UK economy. According to a report, published by the Bank of England, service sector started to dominate the manufacturing sector in 1992. In that year the growth of service sector was two times of the growth of manufacturing sector. It has been found that almost 80% of increased employment in the country in the period of 1990-1992 was due to the rapid growth of service sector. In 1997, country’s economy saw a surplus in current account after twelve years and the main reason behind such excellent performance was the growth of service sector. According to Bank of England, the trend of shifting from manufacturing to service manufacturing has been found over the last three decades and this trend is mainly observed among OECD nations (Julius, n.d.). Over the fourth quarter of the last century, economies of most of the industrialized countries have been undergoing a restructuring process. In this process most of the economic activities are taking place in service sector rather than in manufacturing sector. There can be several reasons behind such shift. Firstly, industrialized countries like USA, UK, Japan and Germany are found to be facing intense competition from other developing countries which are really trying to be industrialized. Such intense competition has made developed countries to focus on creating a service economy. Secondly, economic condition of the people who live in developed countries has increased significantly. As a result their purchasing power has also increased over the passage of time. This increased purchasing power has resulted to the increased demand of various personal consumer services (The Open University, n.d.). Moreover arrival of advanced information and communication technology has worked as a catalyst behind the shift from manufacturing to service. Marketing challenges that services face There are some unique characteristics of service that makes it different from traditional tangible products. These characteristics (intangibility, inseparability, perishability, heterogeneity and lack of ownership) are already explained in the report, but what is important is that because of these characteristics marketing of a service has been different and more challenging as compared to a physical product. Generally there are four P’s that make the marketing mix in case of tangible product. These four P’s are Product, Place, Promotion, and Price. However in case of the service the marketing mix is extended from four P’s to seven P’s which are Product, Place, Promotion, Price, People, Process and Physical evidence. Before getting into the details of this extended marketing mix, it is important to discuss the distinctive challenges that marketers face while marketing a service. There can be several challenges in case of service marketing. Since service is intangible in nature, customers cannot taste, see, feel or touch a service. As a result marketers need to present the service in front of the customer in such way so that customers can feel it like a tangible product. This is a major challenge while marketing a service. Marketers need to be properly skilled in terms of communication, behavior and presentation in order to make customer feel the service. Another challenge of service marketing is the fluctuating demand of service. Marketers must have a clear understanding regarding the nature of the demand of the service so that they can make strategies accordingly. Perhaps the most difficult task to perform in case of service is to maintain quality. Services are evaluated by the consumers on the basis of their quality. In other words it can be said that in order to market a service, a marketer actually needs to market the quality of that particular service. Since quality is the main criteria of evaluation, marketers need to convince customers regarding the quality of the marketed service. However the challenge remains with the fact that convincing a customer regarding the quality of a service is very difficult, because unless the customer is consuming or enjoying the service, he/she will not be in a position to judge the quality of the service. Cost of marketing a service is another crucial aspect. It is very difficult to determine the total cost of sales and marketing of a particular service as it is inseparable and perishable in nature. Services cannot be stored. Moreover it cannot be separated from the person who is providing it. As a result it has to be sold when it is produced and this makes the situation more challenging for the marketers. Reasons behind extended marketing mix In case of service, marketing mix include three additional P’s, people, process and physical evidence. Main reasons behind such extension can be explained by considering the distinct characteristics of service. Firstly service is inseparable which means no one can separate service from the person who is providing it. As a result people are closely attached with the service. It is the service provider’s communication skills, presentation skills, attitude and behavior that attract customers. If receptionist of a hotel does not behave well with the customers, then customers will not come to that hotel in future. Furthermore the quality of a service depends on its provider. So, it is quite clear that ‘people’ is an important factor for service marketing. Service can also be evaluated by the process through which it is delivered. If the cash withdrawal process of bank X is more complex as compared to the process of bank Y, then it is quite obvious that customers will choose the service of bank Y. Process of delivering a service must be simple and fast. Physical evidence is referred to the place where the service is delivered. It is also an important criterion for evaluating service. When a customer enters into a bank, he/she expects certain amount of cleanliness in the office or when a person is travelling in first class, he/she expects sufficient amount place so that he/she can lay down. Conclusion Service sector is the most important sector for any the economy of any developed or developing countries. There are certain unique characteristics of service that make it different from product. Marketing of service is much difficult than the marketing of product and this difference is mainly due to the distinct nature of service. References BBC News, 3 March 2010, Service sector growth hits 'three-year high', [Online] Available at: http://news.bbc.co.uk/2/hi/business/8547944.stm [Accessed on March 4, 2010] Department of Information Studies, No Date, Services marketing, Sheffield University, [Online] Available at: http://dis.shef.ac.uk/sheila/marketing/services.htm [Accessed on March 4, 2010] Economy Watch, No Date, UK GDP, UK Inflation, UK Interest Rates, UK Unemployment, UK Treasury Rates, UK Economic Data, UK Economic Indicators, [Online] Available at: http://www.economywatch.com/world_economy/united-kingdom/uk-economic-indicators.html [Accessed on March 4, 2010] Julius, D. A. No Date, Inflation and growth in a service economy, Bank of London, [Online] Available at: http://www.bankofengland.co.uk/publications/quarterlybulletin/service.pdf [Accessed on March 4, 2010] Mayo, A. No Date, Improving the Framework for Service Innovation and Performance, Department for Business Enterprise and Regulatory Reform, , [Online] Available at: http://www.ssmenetuk.org/docs/ssme_17th2008_AllanMayo.ppt [Accessed on March 4, 2010] Prothero, R. 2007, An analysis of London’s employment by sector, GLA Economics, [Online] Available at: http://www.london.gov.uk/mayor/economic_unit/docs/wp24-employment.pdf [Accessed on March 4, 2010] Reisinger, Y. 2009, International Tourism: Cultures and Behavior, Butterworth-Heinemann The Open University, No Date, The shift from manufacturing to services in industrialised economies, Understanding the new economy, [Online] Available at: http://openlearn.open.ac.uk/mod/resource/view.php?id=253843&direct=1 [Accessed on March 4, 2010] Williams, A. 2002, Understanding the hospitality consumer, Butterworth-Heinemann Read More