Service Marketing sample essay
We have always had service industries, and indeed there are numerous biblical references to services as diverse as inn keeping, money lending and market trading. Over time, the service sector has grown in volume andin the importance attributed to it. According to Baker J.M et al, The Marketing Book 5th Ed, (2003), early economists saw services as being totally unproductive, adding nothing of value to an economy. He quotes Adam Smith as having included the efforts of intermediaries, doctors, lawyers and the armed forces among those who were ‘unproductive of any value’ (Smith, 1977) and this remained the dominant attitude towards services until the latter part of the nineteenth century. Economists now recognize that tangible products may not exist at all without a series of services being performed in order to produce them and to make them available to consumers. So an agent distributing agricultural produce performs as valuable a task as the farmer.
Without the provision of transport and intermediary services, agricultural products produced in areas of surplus would be of little value. Services in recent years have had a major impact on national economies and many service industries have facilitated improved productivity elsewhere in the manufacturing, transportation and agricultural sectors. In this assignment we shall attempt to account for the account for the explosion and importance of the service industry in Zambia, its major characteristics and which of those service characteristics are likely to have an impact for each marketing mix element.
In order for us to effectively account for the explosion of the service industry in Zambia we will define a service, Lovelock and Wright (2001), define a service as an act or performance offered by one party to another. Although the process may be tied to a physical product, the performance is essentially intangible and does not normally result in ownership of any of the factors of production. The same authors alternatively define services as economic activities that create value and provide benefits for customers at specific times and places, as a result of bringing about a desired change in—or on behalf of-—the recipient of the service.
1.1Classification of the Service Industry
Business Services Finance
Communication Health & Social services
Distribution Recreation & sports
Environment Others (Utilities)
2.0IMPORTANCE OF THE SERVICE INDUSTRY TO THE ZAMBIAN ECONOMY Zambia is one of Sub-Saharan Africa’s most highly urbanized countries. About one-half of the country’s 13 million people are concentrated in a few urban zones strung along the major transportation corridors, while rural areas are under-populated. Unemployment and underemployment are serious problems. National GDP has actually doubled since independence, but due in large part to high birth rates and AIDS per capita annual incomes are currently at about two-thirds of their levels at independence For the first time since 1989 Zambia’s economic growth reached the 6%-7% mark(in 2007) needed to reduce poverty significantly.
Copper output has increased steadily since 2004, due to higher copper prices and the opening of new mines. The maize harvest was again good in 2005, helping boost GDP and agricultural exports. Cooperation continues with international bodies on programs to reduce poverty, including a new lending arrangement with the IMF in the second quarter of 2004. A tighter monetary policy will help cut inflation, but Zambia still has a serious problem with high public debt.
Firstly, there is little doubt that the services sector has become a dominant force in developing economies, accounting for about three-quarters of all employment in the USA, UK, Canada and Australia. There appears to be a close correlation between the level of economic development in an economy (expressed by its GDP per capita) and the strength of its service sector. The same can be said about Zambia. Zambia’s gross domestic product composition by sector is: 21.5% agriculture, 35.2% industry, 43.4% service. These statistics clearly goes to show that the service industry is a vital sector and is one of the major driving force for the economy of Zambia as it is the contributes almost half of the country’s gross domestic product.
As we have come to realize the service sector is in an almost constant state of change. Traditionally, many service industries were highly regulated. Government agencies mandated price levels, placed geographic constraints on distribution strategies, and, in some instances, even defined the product attributes. Since the early 1990s, there has been a trend in Zambia toward complete or partial deregulation in several major service industries. Reduced government regulation has already eliminated or minimized many constraints on competitive activity in such industries as airlines (Zambezi airlines), railroads (Railway Systems of Zambia), trucking, banking, securities, insurance, and telecommunications(Airtel and MTN).
Barriers that had prevented new firms from entering the industry have been dropped in many instances: Geographic restrictions on service delivery have been reduced, there is more freedom to compete on price, and existing firms have been able to expand into new markets or new lines of business. This in turn has thus had a positive impact on the economy which has been growing steadily upto date and all this can be attributed to the growth in the service industry which makes up almost half of the nation’s gross domestic product.
Secondly To justify the growing importance of the service sector in the recent period, the factors which have been highlighted, are the increasing role of the government in implementing the objectives of growth, employment generation and poverty amelioration, the historical role of the urban middle class in wholesale trade and distribution and the demonstration effect in developing countries like Zambia creating demand patterns similar to those of developed countries (Panchmukhi, Numbia and Mehta, 1986). The increase in intermediate demand for services emphasizes the role of increasing connections between manufacturing and services and transfers of service-type activities outside the firm (Fuchs, 1968; Kutcher & Personic, 1986; Tschetter, 1987; Barker, 1990). Moreover, income growth increases the market for services and expands the size of service sector, which benefits the industrial sector in two ways – first, by enabling greater specialization and division of labor and, second, by lowering the effective costs of service inputs to industrial production (Jones & Kierzkowski, 1988; Francosis, 1990).
Greater varieties of competing services afford greater flexibility to producer in minimizing the cost of producing a given level of output. If there were no fixed costs in producing services, however, there would be an infinite variety available in the market because each firm in the industrial sector would demand an infinitely small amount of an infinite variety of services. But as long as there are fixed costs, the extent of variety will be limited by the size of the market for services. This gives a link between income growth and the efficiency of industrial production (Eswaran & Kotwal, 2002). Thus the introduction of the services sectors enhances the understanding of the process of industrialization in a significant way.
The importance of the service industry to the Zambian economy is clearly seen above and goes to show that it is one of the major driving force to the growth of the economy. Other benefits the industry brings are: * They are facilitators of domestic growth –In 2003, contributed on average 68% of the global GDP ,43.2% of the domestic GDP in Zambia. * They anchor and support the entire goods production process by providing value-added inputs for competitive industrial development. * They contribute to job creation –services activities have become primary creators of new jobs, accounting for over 90% of new jobs globally since mid-1990s (However, in Zamia the shift of labor structure out of agriculture and into services is still low)
* They are vital to poverty alleviation and key to realizing the MDGs both: directly –in terms of enhancing the availability and affordability of education, health, energy, ITC services-; and Indirectly –by alleviating poverty and empowering women through entrepreneurial and employment creation opportunities in services enterprises (Zambia’s overall progress towards the MDGs is impressive; the services sector is already contributing to this purpose but more needs to be done)
3.0MAJOR CHARACTERISTICS OF THE SERVICE INDUSTRY
The services have unique characteristics which make them different from that of goods. The most common characteristics of services are: Intangibility.
Services are activities performed by the provider, unlike physical products they cannot be seen, tasted, felt, heard or smelt before they are consumed. Since, services are not tangibles, they do not have features that appeal to the customerâ€™s senses, their evaluation, unlike goods, is not possible before actual purchase and consumption. The marketer of service cannot rely on product-based clues that the buyer generally employs in alternative evaluation prior to purchase. So, as a result of this, the services are not known to the customer before they take them. The service provider has to follow certain things to improve the confidence of the client: The provider can try to increase the tangibility of services. For example, by displaying a plastic or a clay model showing patients an expected state after a plastic surgery.
The provider can emphasize on the benefits of the service rather than just describing the features. Not all the service product has similar intangibility. Some services are highly intangible, while the others are low i.e. the goods (or the tangible component) in the service product may vary from low to high. For example: Teaching, Consulting, Legal advices are services which have almost nil tangible components; While restaurants, fast food centers, hotels and hospitals offer services in which their services are combined with product (tangible objective) , such as food in restaurants, or medicines in hospitals etc.
Services are typically produced and consumed simultaneously. Incase of physical goods, they are manufactured into products, distributed through multiple resellers, and consumed later. But, incase of services, it cannot be separated from the service provider. Thus, the service provider would become a part of a service. For example: Taxi operator drives taxi, and the passenger uses it. The presence of taxi driver is essential to provide the service. The services cannot be produced now for consumption at a later stage / time.
This produces a new dimension to service marketing. The physical presence of customer is essential in services. For example: to use the services of an airline, hotel, doctor, etc a customer must be physically present. Inseparability of production and consumption increases the importance of the quality in services. Therefore, service marketers not only need to develop task-related, technical competence of service personnel , but also , require a great input of skilled personnel to improve their marketing and inter personal skills.
Services are deeds, performance or act whose consumption take place simultaneously; they tend to perish me the absence of consumption. Hence, services cannot be stored. The services go waste if they are not consumed simultaneously i.e. value of service exists at the point when it is required. The perishable character of services adds to the service marketerâ€™s problems. The inability of service sector to regulate supply with the changes in demand; poses many quality management problems. Hence, service quality level deteriorates during peak hours in restaurants, banks, transportation etc. This is a challenge for a service marketer. Therefore, a marketer should effectively utilize the capacity without deteriorating the quality to meet the demand.
Services are highly variable, as they depend on the service provider, and where and when they are provided. Service marketers face a problem in standardizing their service, as it varies with experienced hand, customer, time and firm. Service buyers are aware of this variability. So, the service firms should make an effort to deliver high and consistent quality in their service; and this is attained by selecting good and qualified personnel for rendering the service.
The buyer often plays a major role in the marketing and production of services. The hairstylist`s customer may describe the desire look and make suggestions at several stages of the styling process. Clients of tax preparation firms supply relevant information and frequently work closely with the tax specialists. Restaurant customers may put together their entire meals at a well- stocked soup-and –salad bar. For tangible goods, the only major examples of buyer involvement are the specifications for major capital items like installations. By contrast, the interaction of buyer and seller at the production and distribution stages is a common feature of a service. (BOONE&KURTZ, contemporary marketing,1992, p372)
4.0SERVICE CHARACTERISTICS WHICH ARE MOST LIKELY TO HAVE AN IMPACT ON THE MARKETING MIX ELEMENTS
Some businesses sell products, others sell services and the remainder sell products and services. This article examines the characteristics of a service and looks at how the marketing mix can be adapted to market a service. There are five characteristics to a service:
Each of these needs to be taken into account when marketing a service.
4.1.1Lack of Ownership
You can not own a service and you cannot store a service like you can store a product. Services are used or hired for a period of time. For example when you buy an aero plane ticket to fly to the USA, you are buying a service which will start at the beginning of the flight and finish at the end of the flight. You cannot take the aero plane flight home with you.
You cannot hold or touch a service unlike a product. This is because a service is something customers experience and experiences are not physical products.
Services cannot be separated from service providers. A product can be taken away from the producer but a service cannot be taken away as it involves the service provider or its representatives doing something for the customer. For example a company selling ironing services needs the company to iron the clothes for you.
Services last a specific time and cannot be stored like a product for later use. For example an interior designer will design a property once. If you would like to redesign the house you will need to purchase the service again.
Firms have systems and procedures to ensure that they provide a consistent service but it is very difficult to make each service experience identical. For example two identical plane journeys may feel different to the passengers due to circumstances beyond the airline’s control such as weather conditions or other passengers on the plane.
Now we look at how the marketing mix for marketing a service is different to the marketing mix for products. Just like the marketing mix of a product the service marketing mix comprises of Product, Price, Place and Promotion. However, as a service is not tangible the marketing mix for a service has three additional elements: People, Process and Physical Evidence.
People are an essential ingredient in service provision; recruiting and training the right staff is required to create a competitive advantage. Customers make judgments about service provision and delivery based on the people representing your organization. This is because people are one of the few elements of the service that customers can see and interact with. The praise received by the volunteers (games makers) for the London 2012 Olympics and Paralympics demonstrates the powerful effect people can create during service delivery. Staff require appropriate interpersonal skills, attitude, and service knowledge in order to deliver a quality service. In the UK many organizations apply for the “Investors in People” Accreditation to demonstrate that they train their staff to prescribed standards and best practices.
This element of the marketing mix looks at the systems used to deliver the service. Imagine you walk into Burger King and order a Whopper Meal and you get it delivered within 2 minutes. What was the process that allowed you to obtain an efficient service delivery? Banks that send out Credit Cards automatically when their customer’s old one has expired again require an efficient process to identify expiry dates and renewal. An efficient service that replaces old credit cards will foster consumer loyalty and confidence in the company. All services need to be underpinned by clearly defined and efficient processes. This will avoid confusion and promote a consistent service. In other words processes mean that everybody knows what to do and how to do it. 4.2.2Physical Evidence (Physical Environment)
Physical evidence is about where the service is being delivered from. It is particularly relevant to retailers operating out of shops. This element of the marketing mix will distinguish a company from its competitors. Physical evidence can be used to charge a premium price for a service and establish a positive experience. For example all hotels provide a bed to sleep on but one of the things affecting the price charged, is the condition of the room (physical evidence) holding the bed. Customers will make judgments about the organization based on the physical evidence. For example if you walk into a restaurant you expect a clean and friendly environment, if the restaurant is smelly or dirty, customers are likely to walk out. This is before they have even received the service.
The Service Marketing Mix involves Product, Price, Place, Promotion, People, Process and Physical Evidence. Firms marketing a service need to get each of these elements correct. The marketing mix for a service has additional elements because the characteristics of a service are different to the characteristics of a product. The Characteristics of a service are:
Lack of ownership
To certain extent managing services are more complicated then managing products, products can be standardized, to standardize a service is more difficult as there it can be affected by factors outside the service providers control.
Services constitute over 50% of GDP in low income countries and as their economies continue to develop, the importance of services in the economy continues to grow. The service economy is also key to growth, for instance it accounted for 47% of economic growth in sub-Saharan Africa over the period 2000–2005 (industry contributed 37% and agriculture 16% in the same period).
This means that recent economic growth in Africa relies as much on services as on natural resources or textiles, despite many of those countries benefiting from trade preferences in primary and secondary goods. As a result, employment is also adjusting to the changes and people are leaving the agricultural sector to find work in the service economy. This job creation is particularly useful as often it provides employment for low skilled labour in the tourism and retail sectors, thus benefiting the poor in particular and representing an overall net increase in employment. The service economy in developing countries is most often made up of the following:
It is the recommendation of this paper that the Government of the republic of Zambia invest more in market research for the service sector so as to boost it a step further since it has been clearly concluded that the Service sector is the lifeline for the social economic growth of a country. It is today the largest and fastest growing sector globally contributing more to the global output and employing more people than any other sector, and the real reason for the growth of the service sector is due to the increase in urbanization, privatization and more demand for intermediate and final consumer services. Availability of quality services is vital for the well being of the economy.
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http://www.studymode.com/subjects/importance-of-service-marketing-in-indian-economy-page1.html http://www.citeman.com/274-characteristics-of-services.html#ixzz2EUZllnwe http://www.learnmarketing.net/servicemarketing.htm
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