A service is the action of doing something for someone or something. It is largely intangible (i.e., not material). A product is tangible (i.e., material) since you can touch it and own it.
A service tends to be an experience that is consumed at the point where it is purchased, and cannot be owned since is quickly perishes. A person could go to a cafe one day and have excellent service, and then return the next day and have a poor experience.
A service is an activity which has some element of intangibility associated with it, which involves some interaction with customer or with property in their possession, and does not result in a transfer of ownership.
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1. What is Service? 2. Definitions of Service 3. Concept 4. Characteristics 5. Nature 6. Importance of Service Marketing
7. Classification of Services 8. Approaches towards Service Upgradation. 9. Role in Modern Economy 10. Service Encounters
11. Roles of Different Departments towards Better Service Performance 12. Tasks 13. Why to Study Customers’ Relationship Marketing in ‘Services’? 14. Service Recovery 15. Service Pricing 16. Trends.
What is Service: Definitions, Nature, Classification, Role, Recovery and Pricing
What is Service?
A service is the action of doing something for someone or something. It is largely intangible (i.e., not material). A product is tangible (i.e., material) since you can touch it and own it. A service tends to be an experience that is consumed at the point where it is purchased, and cannot be owned since is quickly perishes. A person could go to a cafe one day and have excellent service, and then return the next day and have a poor experience.
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A service is an activity which has some element of intangibility associated with it, which involves some interaction with customer or with property in their possession, and does not result in a transfer of ownership.
A change in condition may occur and production of the service may or may not be closely associated with a physical product. It includes a wide variety of services. There are the business and professional services such as advertising, marketing, research, banking, insurance, computer- programming, legal and medical advice.
Then there are services which are provided by professionals but consumed for reasons not of business, rather for leisure, recreation, entertainment and fulfillment of other psychological and emotional needs such as education, fine arts, etc.
In the words of W.J Stanton, Services as fulfilling certain wants and states that, “services are those separately identifiable, essentially intangible activities which provide want-satisfaction, and that are not necessarily tied to the sale of a product or another service.”
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According to American Marketing Association (1960), “Services are activities, benefits, or satisfactions which are offered for sale, or provided in connection of sale of goods”.
A Service is 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.
Marketing is the flow of goods and services from the producer to consumer. It based on relationship and value. In common parlance it is the distribution and sale of goods and services. Marketing can be differentiated as marketing of products, and marketing of services.
Marketing includes the services of all those indulged may it be then the wholesaler retailer, warehouse keeper, transport etc. In this modern age of competition marketing of a product or service plays a key role. It is estimated that almost 50% of the price paid for a commodity goes to the marketing of the product in US. Marketing is now said to be a term which has no particular definition as the definitions change every day.
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“Managing the evidence” refers to the act of informing customers that the service encounter has been performed successfully. It is best done in subtle ways like providing examples or descriptions of good and poor service that can be used as a basis of comparison. The underlying rationale is that a customer might not appreciate the full worth of the service if they do not have a good benchmark for comparisons.
However, it is worth remembering that many of the concepts, as well as many of the specific techniques, will work equally well whether they are directed at products or services. In particular, developing a marketing strategy is much the same for products and services, in that it involves selecting target markets and formulating a marketing mix.
Thus, Theodore Levitt suggested that “instead of talking of ‘goods’ and of ‘services’, it is better to talk of ‘tangibles’ and ‘intangibles’”. Levitt also went on to suggest that marketing a physical product is often more concerned with intangible aspects (frequently the ‘product service’ elements of the total package) than with its physical properties.
Charles Revson made a famous comment regarding the business of Revlon Inc. – ‘In the factory we make cosmetics. In the store we sell hope.’ Arguably, service industry marketing merely approaches the problems from the opposite end of the same spectrum.
What is Service – Definitions
Service is described in the Oxford English Dictionary as “the action of serving, helping, or benefiting; conduct tending to the welfare or advantage of another; condition or employment of a public servant; friendly or professional assistance.”
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Webster’s Ninth New Collegiate Dictionary, service is described as “the occupation or function of serving others; employment as a servant; contribution to the welfare of others.”
Philip Kotler defines a service as, “Any act or performance that one party offers to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to the physical product.”
According to Kotler and Armstrong, “A service is an activity or benefit that one party can offer to 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.”
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Explanation – Services are Intangible products such as accounting, banking, cleaning, consultancy, education, insurance, expertise, medical treatment, or transportation. Services deal with processes rather than with thing are experienced rather than consumed.
According to Quinn, Gagnon, ‘Services are actually all those economic activities in which the primary output is neither a product nor a construction’.
According to Kotle, ‘Any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything.’
According to Gronroos, ‘A service is an activity or series of activities of more or less intangible nature that normally, but not necessarily, take place in interactions between the customer and service employees and/or systems of the service provider, which are provided as solutions to customer problems.’
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“Services are activities, benefits or satisfactions, which are offered for sale or are provided in connection with the sale of goods” – American Marketing Association
“Services refer to social efforts, which include government to fight five great evils- wants, disease, ignorance, squalor and illness in the society”. – Sir William Bieveridge
“A service is any activity or benefit that one party can offer to another which is essential intangible and does not result is the ownership of anything. Its production may or may not be tied to a physical product”. – Philip Kotler
“The service is an activity that has an element of intangibility associated with it and involves the service provider’s interaction either with the customer or with the property belonging to the customer. The service does not involve the transfer of ownership of the output”. -Adrian Payne
“Services are actually all those economic activities in which the primary output is neither a product nor a construction.” – Quinn, Gagnon
“A service is and activity or series of activities of more or less intangible nature that normally, but not necessarily, take place in interactions between the customer and service employees and/or systems of the service provider, which are provided as solutions to customer problems.” – Gronroos
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“Services include all those economic activities that are intangible and imply interaction to be realized between a service provider and the consumer.” – Van Looy et al
“Services are economic activities that create value and provide benefits to customers at specific times and places as a result of bringing about a desired change in or on behalf of the recipient of services.” – Lovelock
“Services are separately identifiable, intangible activities which provide satisfaction when marketed to consumers and/or industrial users and which are not necessarily tied to the sale of a product or service.” – William J Stanton
What is Service – The Concept
In common parlance, the term can’t be only personal services like auto repairing, haircutting, services of dentists, legal consultants and so on. The marketing experts view the problem in a bit different way. They feel that the contents of services are much more-wider. There is no doubt in it that a number of experts have attempted to define the services but no single definition has been accepted universally. It is quite natural that as and when we attempt to clarify the perception, a number of comments crop up.
According to US Government’s Standard Industrial Classification, “Establishments primarily providing a wide variety of services for individuals, business and government establishments and other organisations, hotels and other lodging places, establishments providing personal services, repair and amusement services, educational institutions, membership organisations and other miscellaneous services are included.”
On the basis of the classification made by the Standard Industrial Classification, it is clear that different types of services are an important base for the services establishments offering services to both categories of customers, the individuals as well as the organisations.
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Another expert says, “Services refer to social efforts which include even government to fight five giant evils, e.g., want, disease, ignorance, squalor and illness in the society.”
This opinion focuses on the organisations offering social services where hospitals or medicare or health centres, communication organisations, educational institutions are found important. Thus, the social efforts and the organisations taking part in the process are supposed to be studied in the very context.
Another opinion throws light on human efforts. An expert says, “Services can also be defined as a human effort which provides succour to the needy. It may be food to a hungry person, water to a thirsty person, medical services to an ailing person and education to a student, loan to a farmer, transport to a consumer, communication aid to two persons who want to share a thought, pleasure or pain.”
The definition given above clarifies that services are human efforts. The focus is on the point that services are not meant services for the sake of services or say, services without charging any fee.
One expert says, “Services can also be defined an action(s) of organisation(s) that maintains and improves the well-being and functioning of people.”
It can’t be refuted that the definition presented by Yakeshel Hasen Field and other through small covers everything which the services need. The well-being functioning of people are important and we can’t ignore it while clarifying the perception of services.
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The American Marketing Association defines services in the following way, “Services are activities, benefits or satisfaction which are offered for sale are provided in connection with the sale of goods.” This definition makes it clear that services are activities, benefits or satisfaction and we find their uses for selling products which may be tangible or even intangible.
What is Service – Top 5 Characteristics: Intangibility, Inseparability, Perishability, Heterogeneity and Ownership
The distinct characteristics of services are discussed below:
1. Intangibility – Services are intangible in nature. They are not physical objects, so they cannot be seen, touched, felt or tasted before purchase. Unlike products, customers have to rely on references, reputation and facilities provided by the service provider to know about the quality of service.
2. Inseparability – Services cannot be separated from the service suppliers. Services are produced and consumed at the same time. Therefore, the service providers have to be careful about the quality of services, as the customer presence is essential in service. For instance, to use the services of a doctor, hairdresser, hotel or an airline, the customer must be physically present to receive the services.
3. Perishability – Services are highly perishable, if not consumed simultaneously, result in a loss. The unused service cannot be stored for future use. For instance, if a person is not able to board his flight or go for a movie, he cannot ask for the refund of the amount he has already paid. Similarly, vacant seat in a flight, an unoccupied room in a hotel represent an economic loss.
4. Heterogeneity – Services cannot be uniformly sold to all the customers. It is difficult to standardise the services. Similarly, different service providers render services differently.
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5. Ownership – Ownership is not transferred in the name of the buyer/user. He will only have the access to services. A service is purchased for the benefit that is provided. For instance, a consumer can use a hotel room; he does not become the owner of a hotel. Ownership remains unaffected in the process of rendering the services.
There are major differences between the goods and services based on the above features. Goods are tangible objects, which are to be manufactured, transported, stored, promoted and sold to the customers.
What is Service – Nature (With Examples)
The service marketers are required to pay special attention to analyse the existence of numerous features of services which are consistently studied in the form of its nature.
Precisely the nature of services are stated here:
1. Intangibility:
i. Services cannot be seen, felt, tested, touched and clearly visible and apparently tangible and material existence,
ii. Services are to a large extent abstract and intangible by its nature,
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iii. A service is made and delivered on spot and hence it cannot be measured as early as tangible products,
iv. They are more focused on benefits, values and customized applicability and use brand name etc.,
v. It is difficult to judge and evaluate the performance quality and values in advance.
Suitable Examples:
a. Counseling services,
b. Accounting services,
c. Financial services,
d. Banking and Insurance services,
e. Data processing,
f. Legal services,
g. Voice telephone,
h. Retail banking,
i. Advertising / PR,
j. Health club,
k. Hospital services,
l. Tours and Travel services,
m. Hotel and Restaurant services,
n. Broadcasting / Cable
o. Office cleaning,
p. Plumbing services,
2. Inseparability:
i. Services cannot be separated from the person or concern who provide them,
ii. Service providers possesses a particular knowledge, skills, efficiency, competencies, training and equipment etc.
iii. Services are typically produced and consumed at the same time with customers participation in the process,
iv. Service providers may use needful equipments, tangible products, physical infrastructure and different materials to be required in service performance,
v. It is a key quality of services which renders it impossible to diverse the supply or production of the service from its consumption. Simultaneously the Production and consumption involves with each other which characterise most services,
vi. The identification and existence of service providers are based on their service performance,
vii. Customers must be present during the production of many services. Customers must have the intimate contact with the production process and service providers.
Suitable Examples:
a. Singer
b. Teacher
c. Doctor
d. Plumber
e. Electrician
f. Beauticians
g. Technicians
h. Health cares,
i. Driving Services
j. Airplane trips
3. Perishability:
i. Services are liable to perish and that will not long last,
ii. Service capacity cannot be stored and carried forward for sale to a future time period,
iii. Services are time dependent which makes them very perishable,
iv. There is no provision of stockpiled as inventories of services,
v. Services have zero inventory. Once sold they stand sold and cannot be returned,
vi. If the services are not fully utilized, that represents a loss. On the other hand most of the services may face a fluctuating demand. This issue is primarily concern of the service providers. Customers only become aware of the issue when there is insufficient supply and they have to wait for the services,
vii. Each unique features of services leads to specific problem for service marketers and it is required to formulate specific strategies for dealing with them,
viii. There is a need to coordinate the demand and supply of services.
Suitable Examples:
a. A car mechanic who has no car to repair today, in future his services will not be stored whenever car will be available for repairs.
b. There is a peak demand of certain train routes which are always more heavily booked than others. On the other hand at the time of low demand of booking, the service capacity may suffer the losses. As such services cannot be stored.
c. If the hotel rooms are not occupied, airline seats are not purchased and telephone line capacity are not used, it cannot be reclaimed.
d. Repairs and Maintenance,
e. Office cleaning services,
f. Laundry and cleaning.
4. Heterogeneity:
i. There are certain difficulties to make standardization and uniformity of the quality of services so that the services are non-standards and highly variable,
ii. It describes the uniqueness of service offering. They are generated, rendered and consumed at one time,
iii. Services have the nature of diverse character and diverse elements,
iv. Service performance from the same service provider or individual may also differ. The services denotes certain results in variation from one service to another or variation in the same service from day to day or from customer to customer. It focus on those service which is unique and cannot be exactly repeated even by the same service provider. It is not possible to make service experience identical and uniform. Service performances is delivered by different people and their performance vary from day to day,
v. It can be introduced as a benefit and point of differentiation.
Suitable Examples:
a. A doctor who pays attention to a patient today may lose his services by next day.
b. All the restaurants offers different services.
5. Ownership:
i. The services are treated as special kind of product,
ii. The services are purchased by customers because they provide certain intangible benefits and satisfaction,
iii. If a customer buy a product he become its owner, but in case of services, he may pay for its use but he will never own it,
iv. In respect of the payment of services, the customers may pay in the form of charges, rent and commission etc. and get the benefits and satisfaction,
v. The customers do not gain the ownership or title on the services.
Suitable Examples:
a. Rented goods services – Customer may have the temporary right to use a physical goods that they prefer not to own. (i.e. boats and costumes etc.)
b. Hired Labour to perform the work i.e. cleaning the house,
c. Expertise services (i.e. Car repairs and Electricians)
d. Rented space and place (i.e. area of premises may be rented for social and other occasions, to reserve the table in restaurants, to book the seat in an aircraft),
e. Usage of system and network (Customers may use the specified system in cyber cafe and telecommunication with different charges)
What is Service – Importance of Service Marketing
The concept and ideology of service marketing is much needful in overall marketing scenario. It is a platform on which a marketer can be able to make an amicable and worthwhile environment to develop better interaction with customers.
As such, the significance or importance of service marketing are stated here:
1. Upgraded Knowledge:
Within phenomenon of marketing, the services may create and develop new and emerging learning aspects to manage and coordinate different business activities. Also services are involved to generate new and knowledgeable aspects to conduct and perform different marketing area.
2. Attention on Customers Welfare:
The overall ideologies of service are based on customers’ orientation as well as their welfare. Every task and approaches concerning of service marketing aims to develop the customers’ welfare. Also the customer’s welfare is the main driving quotes to inspire the promotional task of services.
3. Specialisation:
Every viewpoints and task of service performance are basically required to make the bases of specialization. In modern business the services are required to formulate new techniques of specialization. On the other hand, the service marketing can be able to promote new skills, knowledge, learning attitudes and multifarious competencies within marketing area.
4. Novel Ideologies:
Through new avenues and composition, service marketing are based on new and innovative technologies. At the same time, the applications and composition of different services also contributes novel ideologies, viewpoints, concept, approaches and thoughts in present state of society.
5. Promote Sales Campaign:
Service marketing can establish and promote most appropriate platform for sales campaign. It is the foremost and suitable segment towards implementation of sales campaign programmes in overall marketing phenomenon.
6. Integration between Business and Society:
Service marketing contributes a balancing form and develops an integration between ‘profit motives’ and ‘service motives’. It provide more merchandising opportunities towards business and on the other for the society at large.
7. Better Utilization of Money:
Service marketing contributes different and appropriate attributes and benefits to customers. They are liking to get much satisfaction at the moment of buying process of product and services. By virtue of it, they feel that their money as well as purchasing power are being utilized in most proper way. Better and most acceptable services are being helpful in this context.
8. Credit Facilities:
Somehow, the service marketers also provide the credit facilities to their customers at the moment of service delivery. As such the beneficial customers might be able to buy the products with proper services to utilize their limited income and resources to make better standard of living and manage a certain level of social status.
9. More Customization:
Service marketing emphasize on every beneficial aspects of customers aims to give much response to them. More attention have been given towards the needs and requirements of customers and their family. Every aspect of service marketing is based on the customer’s orientation.
10. Increase in Standard of Living:
The different composition and varieties of services are providing multiple ways and means to make more comfortable and efficient standard of living of customers. They also contribute to develop new avenues to make a happy, healthy and prospective life.
11. Better Customer’s Relationship:
The modern concepts of marketing emphasize on the customers relationship patterns. By means of services, the marketers can focus on the study of the customers perception and attitudes and try to develop their proper acquisition. As such, the concept and framework of services may create and develop overall customers satisfaction to achieve better relationship with customers.
12. Locational Benefits:
The service marketing provides and stimulates different target oriented services. By means of locational aspects, the customers might be able to get their benefits according to their service performances, behavioural, service and cultural profiles.
13. Analysis of Consumers Attitudes and Behaviour:
An attitude is a cognitive element with a feeling and tendency to react positively or negatively in regard to an object. The marketers may find out customers attitudes by means of their knowledge, exposures, belief, experience, social status and mass medias. Study of attitudes may be helpful towards plan of product and service design, parameters personal services and analysis of different behaviour of customers.
14. To Promote Motivational Approaches:
There are different motivational approaches which aim to design more appropriate service performance. The approaches are ego-defensive, self-images, value expressive, brand images, cognitiveness, assurance and learning and knowledge etc. These approaches highlights to promote most suitable and applicable ways to perform excellent services.
15. To Promote Demands of the Products:
Within purview of services phenomenon, there are certain causes to be applicable to increase the demand of the product. The demand of the product may be raised due to upgradation of services to coordinate the consistency of service and to perform the allied services etc. The upgraded level of products’ demand may increase more trade, business, industry and economic viabilities.
16. Value Additions:
The service marketers may develop a platform for value additions. It may develop a most appropriate and concurrent platform to create and develop different attributes and beneficial aspects in products and services. The practical basement of value additions denotes the role of mix variables to develop some areas in market offers.
17. Helpful in Buying Decisions:
The platform of service marketing is very essential to provide some directions and counseling to customers at their buying process. The service providers may contribute rational, beneficial, economical and useful suggestion to customers at the time of their buying decisions.
18. Optimum Utilization of Resources:
Different service organization particularly of personal care services, tourism services, hotel services and public services contribute to the growth of economy. Such services utilize the natural resources in society for future generation.
19. Capital Formation:
There are tremendous indications that services will grow more rapidly in the near future. Economic, social and political factors may stimulate an expansion of the service sector. Investments and job generations are far greater in the service sector compared to manufacturing to promote the capital formation.
20. Employment Generation:
The components of the service sector are wide and varied. Within methods and process of service marketing, there are wide possibilities to generate new employment scenario. Most of the persons with the capacity as traders, salesman, dealers, technicians, professionals and different service providers are getting their employment in wide range of service performance and its allied activities. Thus, the organized and systematic development of the service sector would create enormous employment opportunities.
21. Quality Consciousness:
The overall scenario of service marketing is based on the concept of quality awareness. Most and applicable methods for quality upgradation are needful not only in product development but in service performance also. Quality consciousness provide upgraded level of customers’ satisfaction.
22. Cross Cultural Advantages:
Probably the services are based on different social customs, traditions, languages, castes, colours, relationship, assumptions as well as cultural aspects. By means of service performance, there are some advantages and attributes to develop integrated and mutually of cross cultural environment in our country.
23. Use of Environment Friendly Technology:
Now a days, almost all services are found to be technology driven. Developed countries are making full use of latest technology while rendering services. Technologies used by service generating organizations such as banks, insurance companies, tourism, hotels, communication and education services are not detrimental in any way to the environment.
What is Service – Classification based on End-User, Tangibility, People-Based, Expertise and Profit Orientation
There are a number of ways of classifying service activity, and there is inevitably some degree of overlap between the methods available.
Some of the methods of classification which are commonly used are as follows:
(i) End-User:
Services can be classified into the following categories:
(a) Consumer – leisure, hairdressing, personal finance, package holidays.
(b) Business to business – advertising agencies, printing, accountancy, consultancy.
(c) Industrial – plant maintenance and repair, work wear and hygiene, installation, project management.
(ii) Service Tangibility:
The degree of tangibility of a service can be used to classify services:
(a) Highly tangible – car rental, vending machines, telecommunications.
(b) Service linked to, tangible goods – domestic appliance repair, car service.
(c) Highly intangible – psychotherapy, consultancy, legal services.
(iii) People-Based Services:
Services can be broker, down into labour-intensive (people-based) and equipment-based services.
This can also be represented by the degree of contact:
(a) People-based services – high contact, education, dental care, restaurants, medical services.
(b) Equipment-based-low contact automatic car wash, launderette, vending machine, cinema.
(iv) Expertise:
The expertise and skills of the service provider can be broken down into the following categories:
(a) Professional – medical services, legal services, accountancy, tutoring.
(b) Non-professional – babysitting, caretaking, casual labour.
(v) Profit Orientation:
The overall business orientation is a recognised means of classification:
(a) Not-for-profit – The Scouts Association, charities, public sector leisure facilities.
(b) Commercial – banks, airlines, tour operators, hotel and catering services.
What is Service – Approaches towards Service Upgradation Laid down by Different Organisations
Within business scenario, there are different service organisations as directly or indirectly contributing in it. Here, it is needful to draw a worthwhile attention to make some perspective ways and means as well as suggestive approaches to achieve a certain level of service performance and upgradation as laid down by different organisations.
These are summarised here:
1. Business Services:
i. More emphasis on customisation,
ii. More attention on service motives,
iii. Consciousness towards social responsibilities.
2. Personal Services:
i. Knowledge, skills and competencies,
ii. Commitments and responsiveness,
iii. Develop quality consciousness.
3. Professional Services:
i. Self-management and work spirit,
ii. Code of conduct,
iii. Social values and ethics.
4. Distribution Services:
i. Mutual and integrated relationship,
ii. Locational facilities,
iii. Reciprocal and accountable relationship.
5. Counselling Services:
i. Fair and justified consultation,
ii. Avoid and restrict fraud and misconduct,
iii. Develop more appropriate and justified viewpoints with cooperative attitudes.
6. Communication Services:
i. Fair, justified and appropriate encoding and decoding communication,
ii. Informal communications,
iii. More emphasis on motivational communication.
7. Financial Services:
i. Integrity and commitments,
ii. Transparency and Accountabilities,
iii. Customer’s financial protection and safety.
8. Banking and Insurance Services:
i. Trust, faith and belongingness,
ii. Customer care, prompt services and appropriate complaint handling system,
iii. Well behavior and intellectual capacity of employees and agents.
9. Advertising Services:
i. Social awareness,
ii. Ethical conducts (Fair and Justified Practices),
iii. More emphasis on customers’ orientation.
10. Public Services:
i. Social responsibility and maturity,
ii. Involvement of multifarious groups,
iii. Environmental awareness.
11. Medical Services:
i. Fair and justified behaviour,
ii. Moral and ethical norms,
iii. Human aspects and behaviour.
12. Tourism Services:
i. Protection of socio-cultural values,
ii. Methods to create and develop ecological balance,
iii. Proper conservation and utilisation of natural resources.
13. Transport Services:
i. Promote services and time savings,
ii. Safety of product and services,
iii. Locational facilities.
14. Entertainment Services:
i. Social and cultural awareness,
ii. Well mannerism and ethical norms,
iii. Disciplined attitudes.
15. Postal Services:
i. Prompt and regular services,
ii. More emphasis on public interest,
iii. Effective customer’s interaction.
16. Legal Services:
i. Fair and justified services,
ii. More emphasis on constitutional provisions,
iii. Trust, reliable and cooperative attitudes.
What is Service – Role of Services in Modern Economy
As consumers we use services everyday. Turning on a light, watching TV, visiting a dentist, writing a cheque, etc., are all examples of service consumption at the individual levels.
Unfortunately the customers are not always happy by the fact of the quality of services they receive. People complain about late deliveries, rude or incompetent personnel, inconvenient service hours, needlessly complicated service procedures and a host of other problems. They grumble about the difficulty of findings sales assistants in shops, express frustration about mistakes in their credit card bills, mutter about poor value and sigh as they are forced to wait for service or stand in queue almost everywhere they go.
Suppliers, of services seem to be always have a very different set of concerns. Many complain about how difficult it is to make profit, how hard is to find skilled and motivated employees or how difficult to please customers have become. Some firms believe that the surest route to financial success lies in cutting cost and eliminating “unnecessary frills”.
Happily in almost every field of endeavours there are service suppliers who know how to please their customers while also running a productive, profitable operation staffed by pleasant and competent employees.
The buzzword of today’s economy is liberalisation, privatisation and globalisation.
Liberalisation of the economy refers to the changing nature of policies and procedures to facilitate more growth and ensuring better standards of living. The economy is now open and the best goods and services compete in the market and thus the consumer has a choice and monopoly disappears.
Privatisation and globalisation connects a wide range of ideas which has led to the increased contribution of services. Globalisation led to the increase in foreign direct investment in various sectors thus, contributing in the development of the economy. The notion of “service” is a very important one, with an increasing role in an expanding economy which becomes the condition of sustainable and long- term development. The technical services that must be assured differ according to the type of product.
In Romania, the market economy towards which we are moving today is characterised by an abundant production, an intensive national and foreign competition, a supplying facility all over the region. Through their decisions, consumers and users direct production, encouraging thus distributors through their forms of distribution. In all companies the commercial function includes a series of activities that concentrate on obtaining an optimal market quota, achieving benefits indispensable for an efficient activity, and meeting consumers and users’ requirements.
This conception identifies with the marketing one, and the services become an integral part of the dynamics that characterises the actions which complete the proper commercial administration. The company must pay much attention to all these, the services being considered successful facts and elements that generate actions which must be included in activities such as selling, advertising and promoting.
At the same time, technical services constitute an important marketing tool. Thus, we can appreciate that, when the product characteristics and the price of different offerers are more or less alike, the buyer will choose the goods according to the services that are offered. In conclusion, the marketing researcher must find out the services that buyers want and what it is being offered by the competitive part.
This information permits the calculation of the marketing cost, the formulation of the marketing plan, the choice of the distribution networks, elements necessary in order to assure the services that the buyer requires.
The technical services that must be assured differ according to the type of products. They may include the following categories:
a. Consulting services as regards the way of handling and using the products;
b. Services of complaining that include complaints’ investigation and the repairing of out-of-order products or of those damaged because of the offerer’s guilt;
c. Products repairing and maintenance;
d. Spare parts assuring;
e. Operators’ qualification;
f. The guaranteeing of performances and the usage time.
That is why, we may appreciate that everything is a service in any activity. The state, the public administration offers to the citizens of a country the service of a general organisation and of a financial administration indispensable to any community.
Producers offer to consumers the service of providing them goods of the quality they need by the payment of which are obtained the amounts of money necessary for the resumption of the production process. Companies providing banking, insurance, transport, and maintenance services, offer different kinds of possibilities, means, facilities, security.
Distributors and merchants focus on providing consumers and professional users with productive goods. In addition, they also provide services that encourage the buying process. Natural persons and governmental or non-governmental bodies whose duty is to offer conciliation to the users in view of directing their activity are valuable missionaries of services.
Consumers return the services to distributors, producers, to the state and to economy on the whole, changing the monetary values they obtained for their products and maintaining public activities functioning through taxes payment. It is, thus, a continuous chain of services which also imply notions such as, quality, the value of the services provided the improvement and extension of these services.
The notion of service involves:
a. An effort, that of assisting the development of a “job feeling”;
b. A research activity for finding the means of services adjustment to the real needs, of spreading and applying, services organisation and promotion;
c. A certain consistency in creating a framework of favourable circumstances in general and personal level, the results justifying a good service;
d. In every community there are private interests far from complying with the general interest, frequently characterised by a selfishness that underestimates perspectives.
Within the relationship between producers and distributors the common immediate interest is that of making transactions, as efficiently as possible. The strict confinement to this purpose reduces the value of these relations, reducing them to orders and deliveries, to a mechanism characterised by sporadic operations. Each person remains in his circle of specialised activities and tends to confine himself to his own economic functions.
Still, we may consider that each party tends to see further and to establish a constructive collaboration. Thus, the distributor actually conveys permanently the information he obtained from the producer, in order to direct the first in his research for achieving a productive activity in permanent evolution. At the same time, the producer offers the distributor a totality of technical and commercial knowledge that he owns in order to help and encourage him. These reciprocal services are not compulsory but they have an unchallenged importance for the future.
At the same time, the notion of service can be found in the relations among distributors, consumers, and professional users, among jobs and different sectors in economy. That is why the value of the notion of service has grown in importance and it can be taken for a function of the commercial activity. By supplying with goods suited for all requirements, by completing the idea of business and transaction with jobs offer, quality is improved and thus, this function acquires a more human value that accentuates its social usefulness.
Within Romania type of market economy, producers are evidently interested in raising the value of the services offered for their products that enables them to assist distributors.
The latter are for a more extended “notion of services”, which will differentiate competitors, will draw the buyers’ attention, and will require a higher degree of fidelity on the customers’ part and will draw potential customers. At the same time, the quality of serving is the basis of services marketing, the product being represented by performance that is exactly what the customers are buying.
A better performance will lead to competitiveness growth by gaining customers’ trust, by strengthening institutional image, and, at the same time, to a growth in products selling. Services characteristics influence promotional activities. The use of new promotional techniques – based on the utilisation, during promotional activities, of some components of the system of services creation and delivery – reflects the strong relationship between the product and promotion on the one hand, and the very complex role of services, on the other hand.
As a consequence, by developing “the job feeling”, there is a growth in the number and fidelity of the customers and in the importance of their buying. A well served customer remains a customer; a well-known post-selling service becomes an element that generates future sales, increasing at the same time, the reputation and the notoriety as well as the sources for new customers. Even if objections can be made, or the efforts done are underestimated, most of the customers know to appreciate and they become well-intended promoters, important sustainers of a mark or of a supplier.
The service is also favourable from another point of view, as it can be interpreted as a simply gratuitous act and has as final aim profitableness growth and satisfying consumers’ requirements. On the other hand, in comparison with the large industrial companies power, with the integrated firms and the groups of more and more numerous firms in the field of production and distribution, middle and little size enterprises can, with the help of direct and personal services, exceed their position and, at the same time, increase the number of customers.
That is why it is appreciated that the establishment of a competitive market economy requires an improvement in the role of services. We cannot talk about the same force and plenitude of this attitude in all countries. Thus, if in the Anglo-Saxon countries and in the USA “the job feeling” functions as a true institution, in the Latin countries it is regarded as an individual feature. We are sometimes likely to mistake it with kindness, gentility or to consider it a surface attitude, an apparent manifestation known as “commercial smile”, without making any difference between true and the false services.
In all companies the commercial function includes a series of activities that concentrate on “obtaining an optimal market quota, achieving benefits indispensable for an efficient activity, and meeting consumers and users’ requirements”. This conception identifies with the marketing one, and the services become an integral part of the dynamics that characterises the actions which complete the proper commercial administration.
The company must pay much attention to all these, the services being considered successful facts and elements that generate actions which must be included m activities such as selling, advertising and promoting. At the same time, the sustainable commercial development is directly related to the degree of satisfaction of the customers, who are situated on different links of the distribution chain which is the essential purpose of the service.
Customers always pay attention to the services offered and, in case of discontent, they do not hesitate to address another supplier. Studies show that about 2/ 3rd of the customers who abandon their usual suppliers are determined to do so, because of faulty or insufficient services; only 1/3rd of these customers raise the problem of the price or of the products quality.
“Companies that introduce successfully a new concept of serving always determine ambitious competitors to imitate them. Superior carrying out is vital in supporting the innovator concept of the serving activity. This is due to the fact that serving quality in an organisation is directed by an inspired manager, with an organisational culture directed towards the customer, an efficient use of information and technologies.” Assuring the fidelity of some customers may be considered a second purpose of services.
This fidelity may be relative but its level may influence the efficiency of the company activity. “By offering excellent services at any time, you can turn all your customers into champions. Your best customer is the satisfied one.” Third purpose, perhaps the most important one, is the increase of business importance by growing the amount of attracted buyers-customers (new customers as a consequence of the services offered, more sales as a result of the growth in the services number).
The symmetry between:
a. Domestic and foreign marketing activities;
b. The processes of attaining “customer services” and “employee services” performances;
c. The internal customer’s behaviour (the employee) and the external one is (the customer emphasises the opportunity of some researches regarding customers’ contribution to services productivity, the interdependence between the main elements of services marketing and the one between the main strategies of the services organisations and the components of service marketing. Once achieved, these goals encourage the company development that is wholly- dependent on their commercial development.
In the case of enterprises the problem of services must be well determined, as it is characterised by a multitude of aspects. As in the case of other commercial activities, the enterprise’s interest is that of defining its services policy, its objectives, and strategies. This must be in accordance with the other policies regarding the market, the customers, the prices, the distribution, promoting. Services policy elaboration must be adapted to service’s needs, to customers’ problems as much as possible.
That is why, the elaboration methods must have in view the partial elaboration of different actions, the result of the comparison made between the degree of obtained satisfaction and the desires previously expressed. Thus, the objectives and the strategies of developing a framework proper for this services policy can be established.
During the process of services policy application there have been identified three stages:
(a) The stage that precedes the selling;
(b) The stage during the selling that have in view purchasing facilities;
(c) The after-selling stage.
All these stages must assure the continuity of the activity of services, of the means and methods of selling (without being mistaken with selling promotion).
As in the case of any other field, a certain job feeling must be obvious in actions which must be organised on the basis of general ideas in order to be constructive and efficient.
The US and other developed economies are now dominated by the services sector, accounting for more than two-thirds of their gross domestic product (GDP). Individual sectors such as the food system are also increasingly affected by the growing dominance of the service sector.
Consumers, for example, are paying more for services than for the raw materials in the foods they buy at the grocery store. They are also spending more of their disposable income at restaurants and at other eating establishments, where the service component is very large. On the supply side, purchased inputs and off-farm services are making up a growing share of farmers’ total production costs.
While most attention in trade policy is focused on farm-level and commodity policies, it is clear that growth in the relative importance of services in the food system merits closer examination.
Trade in services has grown faster than merchandise trade in the past two decades. As estimated from balance-of-payments statistics, total transactions of commercial service trade accounted for over 20% of cross-border world trade in 2000, at more than $1.44 trillion. Trade in services became a major issue in the Uruguay Round negotiations, and is a continuing source of trade friction. It is also a major focus of the new World Trade Organisation (WTO) Doha Development Agenda, launched in November 2001.
Services cover a variety of sectors, each with distinct characteristics.
Large sectors such as banking, insurance, and financial services have become increasingly necessary as world trade has expanded. Opening overseas markets to these sectors has become a growing issue for developed countries, the main producers of these services. Services in wholesale and retail trade and transportation industries are also very large sectors in many countries and are closely linked to trade in commodities. Reducing the costs of services, (e.g., marketing, communications, and transportation costs) is now a key driver in the expansion of world trade.
Service sectors such as finance, telecommunications, and transportation are the backbone of any modern economy, and these sectors are similarly vital to the world food system. Well-functioning service industries contribute to the efficiency of the world food system in a variety of ways.
An efficient financial sector helps deploy resources where they bring the highest return within the food production sector and along the distribution chain. Shippers need access to short-term credit to facilitate the flow of food products from one market to another. Farmers need credit to modernise their equipment and to apply new technologies. Farmers and ranchers need access to insurance to minimise the risk of loss from natural disasters and economic misfortune.
Improved telecommunication efficiency generates economy wide benefits; it is a vital intermediate input and contributes to the diffusion of knowledge, including new agricultural technology. The growing trade in perishable products makes rapid dissemination of information about market conditions and shipping options crucial for timely delivery and freshness.
Transportation systems and wholesale and retail services contribute to the efficient distribution of food and agricultural products within a country and in overseas markets. Business services such as legal advice and market analysis can reduce costs of penetrating new food markets. Improvement in education and health services can contribute to the accumulation of human capital in rural areas, making them more attractive for investment.
What is Service – Service Encounters
Once the customer purchases a product, he automatically gets connected with the company. He gets a couple of contact people from the company with whom the customer can talk to regarding any queries or suggestions. Right from filling up the form, submitting the application and purchasing the goods, there are multiple employees who service the customer.
These are known as service encounters which may take place in various forms like indirect encounter, telephonic encounter and face-to-face encounters. Since technology is fast booming, most of the companies do prefer telephonic or indirect encounters wherein they can give quick service to the customers.
Service environments speak a lot about the quality of service being provided by the company. Since it has all the tangible characteristics like furnishings, noise, interiors, exteriors, odour and cleanliness, a customer can very well relate to the quality based on the above mentioned elements. Moreover, depending on these elements customers also start framing their expectations and hopes accordingly.
Service personnel are employees of the company who matter equally throughout the process. The way they behave with their customers, their body language, knowledge and appearance make a lot of difference both to the company as well as the customers. Mistakes and faulty services do happen, however, how the employee handles the situation will actually decide its customer retention.
If the employee remains in constant touch with the customers, listens to him patiently and works on the given feedback then the customer will surely feel confident and important. Moreover, based on the above mentioned factors, even the customers start expecting quality service and treatment from the responsible employees.
Support services are the ones which are made for supporting the services being provided to the customers. They include the equipments, materials and all the backstage process which forms the backbone for these front stage employees to function smoothly and efficiently.
This part of service encounter is very important because without them, employees won’t be able to provide quality service to the customers which will result in losing them completely.
Other Customers:
For a customer, feedback and reaction of other customers is very important while making any purchase decisions. Thus, people always look for a feedback from others before buying anything or signing for any service provider. This forms a mental belief amongst all the buyers that if everyone is buying one thing then there is something really good about it.
Thus, places like restaurants, cinema halls, medical clinics, transport service providers and others must pull in a good crowd and maintain the same so that every customer believes that it is worth the cost. Similarly, when a customer behaves badly, even the other customer gets affected thinking that the services or the products are not good.
So basically the situation is that one customer leads to the other and thus it is very important to give quality service to everyone as every customer is important!
Factors Leading to Satisfaction or Dissatisfaction in Service Encounters:
It is the quality of the service that creates a satisfied or an unsatisfied customer. If the quality of the product is good then there are many happy and satisfied customers; however if the quality falls then these happy customers immediately turn into the most unsatisfied ones.
Following are the points that can influence customer perceptions about the services of the company:
1. Recovery:
Service failures do happen and it is important on a company’s part to listen to the customers patiently. This is called the recovery process where the mistake is done, but now the company has to concentrate on creating its image back on the customer’s mind. Thus, working closely with the customers by implementing their suggestions can help the company regain its original image and quality of service.
2. Adaptability:
Sellers must be adaptable in nature to work with the changing needs of the customers. Right from the retailers to the wholesalers and the manufacturers, everyone has to work backwards to produce a desired service that matches up with the requirements of the customers. It is the flexible service delivery system that helps the employees of the service.
3. Spontaneity:
Sellers must maintain spontaneity while rendering their services. If they behave well with the customers during the start but at a later stage they disrespect them in any way, then the customers start losing interest in their services. Thus, sellers have to be spontaneous enough with all their customers throughout the dealing process in order to maintain long lasting and healthy relationships.
4. Coping:
It is important for the employees to cope up with stressful situations with ease and respect. There will be problems with the customers; however, employees should know how to deal with them successfully in a peaceful manner without hurting anyone’s sentiments.
What is Service – Roles of Different Departments towards Better Service Performance
In any organization, the services and its allied activities are more or less performed by different functional tasks. These are performed within different functional area. These areas or respective departments perform their task under the leadership of functional managers.
The roles of different departments towards better service performance are briefly stated here:
1. Production Management:
Production is an important and specific part of entire business. It perform all the managerial functions like planning, decision making, organizing, coordination, direction and control for the requirements of raw material, equipments, machineries, infrastructural facilities in context of technological improvement in service processes and performance.
2. Cost Management:
Cost management is concerned to collect, evaluate, analyze, account and classify the expenditures relating to the service activities of the concern. It deals to manage, organize, coordinate and control all the direct and indirect components of the cost of different service segments. It includes different aspects within their analysis particularly the elements of cost, cost estimation, calculation of cost, cost structure and variation between estimated cost and actual cost etc.
3. Accounting Management:
Accounting management is also an important part of functional management. It includes the systems, procedures, documents and records concerning the financial management and cost management etc. It aims to manage and maintain the accounts, records, statements and other informative documents to be used in these accounting area within the purview of services.
4. Financial Management:
According to Bowars and Upton – ‘Financial Management is the application of planning and control of the financial functions’. It deals with different financial aspects and issues. Financial management is an indispensable organ and have a wide scope of service management. It is more analytical and less descriptive. It helps the marketers in determining policies and plans as well as in decision making also. Today the service performance is measured on the basis of financial results.
5. Office Management:
Office management is a pivot and central point of the service management. In fact, all the activities, performance, directions and policy implementation are directed and controlled over this focal point. It manage and maintain all the records and accounts relevant to different sections and departments of the concern.
6. Personnel Management:
Personnel Management is more concerned with the different aspects of human relations and behavior. It performs several roles like policy determination, planning, organizing, direction, decision making, motivation and control which are more concerned with the employees invariably relating to service process and performance. It also conduct different tasks like recruitment, selection, wages and salary determination, training, promotion, demotion, health, welfare and grievance redressal concerning them.
7. Marketing Management:
According to Stanton – ‘Marketing is total system of business activities designed to plan, policies, programmes and promote the services to target markets to achieve organizational objectives’. There are different functions like service planning, standardization, procurements, warehousing, logistic, retailing, pricing, promotion, personal services and market segmentation being performed at the service marketing management scenario.
8. Advertisement Management:
Advertising is any form of paid and non-personal presentation of ideas, goods or services for the purpose of including people to get it. According to Sheldon – ‘ Advertising is a business force, which through the printed words, sells or help sales, builds reputation and foster goodwill’.
In context of service marketing, it aims to introduce new service to enhance service acceptance and to create new customers etc. It emphasize and influence the buying decision and to get public participation in service performance.
9. Communication Management:
According to Newman and Summer – “Communication is an exchange of facts, ideas, opinions or emotions from one person to another”. In any business organization, information are used for making and implementing different targets and policies for the achievements of service objectives. The communication management organize a mutual process to make more reliable and integrated relations, to determine plans and policies, making sound decisions, coordination and to develop motivational aspects within different multidimensional structure in service organization.
10. Public Relation Management:
The objectives of public relations is to produce a favourable image of a concern and improve on it, if necessary. It is a media and have a two way communication with the society. Within business scenario, the public relations management perform the tasks like service publicity, promotional programmes, social services, community relations, advisory functions, welfare amenities and civil affairs etc. As such, the PR management contributes integrated relations between service organization and society.
11. Environmental Management:
It is also an important part of business area. It analyze and evaluate different role of environmental factors and their consequence effects on the working and performance of business concern. The major factors are consumers’ demand, supply of product, price level, level of competition, new technology, Government rules and different demographical aspects etc. It develop and manage various measures and devices to make better environmental situations.
12. Quality Management:
Basically, the concept of total quality is the notion that excellences is essential in all the functions of business and its allied activities in context of services. It aims to manage specialization, raise the productivity, better work performance, create reliability in product and services, optimum utilization of the resources, raise the level of customer’ satisfaction etc.
13. Research and Development Management:
Today it is needful to make some worthwhile coordination and follow the different aspects of changing environment. With the emerging issues like innovations, change environment, technological upgradation, professionalization, social values, service patterns and new behavioural approaches, there is a need to manage the research investigation and organize the developmental activities at large.
In any business, within the purview of strategical and operational planning, there is a needful area to develop the research and developmental task properly. It aims to make optimum allocation and utilization of resources, quality maintenance, process control, innovative concepts, cost control, performance measures and time management etc. towards better service performance.
What is Service – Tasks in Service Marketing
1. Understanding the Nature of the Services:
Understanding the nature of the service is the first task in service marketing. The nature of the service gives clues on benefits expected by customers from it. Service marketers have to, therefore, analyse the nature of the service and gain relevant insights on it. The marketer should figure out what exact need is met by the service.
It gives basic clues to its nature. Some services are directed at people while others are directed at goods, though in the final analysis both aim at satisfying people. For e.g. – entertainment is directed at people while the cleaning is directed at clothes (goods).
2. Understanding the Customer and His Expectation of the Service:
Service marketers must understand the customers well and correctly size up their expectations of the service for this; they must carry out a thorough customer analysis. The important point is that customer analysis in a service context involves first-hand and not second-hand knowledge about the customers.
The sales and service staff must be encouraged to make plenty of personal contacts with the customers and gather relevant first-hand data on their requirement / expectations of the service.
3. Giving a Shape to the Service:
In order to give shape to the service, the service marketers must have a good grasp of the following ideas:
i. Service Benefits – Service benefits simply means customer benefits resulting from the service. Service marketers must be clear about the service benefits involved in the concerned case.
ii. Service Expectations – Service expectations refer to Service benefits, which the customers seek from the service.
iii. Service Offer – Service offer means the bunch of benefits that is offered by the firm in the service.
iv. Service Form – It explains in what way the service is to be provided.
v. Service Level – It explains what quality and how much service is to be provided.
4. Organising Delivery System:
Organizing the delivery system and channels/intermediaries is the next important task. Issues in this regard spring from the service offer. The delivery system must fulfill the service offer and generates the expected satisfaction. Location decision and decision on use of channels are the two main issues here.
5. Location Decision:
Location decision i.e., where to locate the service is the first issue. Actually, many services are ‘fixed’ location-wise and service providers are able to serve only a limited number of customers located in the area. Thus, choosing the location appropriately and attracting the right kind of and maximum number of customers is of special importance in service marketing.
6. Using Channels/Intermediaries:
Decision on use of channel is a part of organizing the delivery system. Here, the service marketers should first decide whether he should use intermediaries at all or should reach out to the customers directly.
7. Achieving Differentiation:
Service marketers have to take differentiation if they have to escape price competition and achieve big growth.
Service marketers can develop differentiation by following anyone or the other preferably all of the routes available:
i. Differentiate the offer
ii. Differentiate the actual performance of the service on the basis of –
a. The people providing the service
b. The physical evidence involved in the service
c. The process involved in the service.
iii. Differentiate the image.
Service Delivery:
The delivery of a service typically involves six factors:
i. The accountable service provider and his service suppliers (e.g., the people).
ii. Equipment used to provide the service (e.g., vehicles, cash registers).
iii. The physical facilities (e.g., buildings, parking, waiting rooms).
iv. The requesting service consumer.
v. Other customers at the service delivery location.
vi. Customer contact.
The service encounter is defined as all activities involved in the service delivery process. Some service managers use the term “moment of truth” to indicate that defining point in a specific service encounter where interactions are most intense.
Many business theorists view service provision as a performance or act (sometimes humorously referred to as dramalurgy, perhaps in reference to dramaturgy). The location of the service delivery is referred to as the stage and the objects that facilitate the service process are called props.
A script is a sequence of behaviours followed by all those involved, including the client(s). Some service dramas are tightly scripted, others are more ad lib. Role congruence occurs when each actor follows a script that harmonizes with the roles played by the other actors.
In some service industries, especially health care, dispute resolution, and social services, a popular concept is the idea of the caseload, which refers to the total number of patients, clients, litigants, or claimants that a given employee is presently responsible for. On a daily basis, in all those fields, employees must balance the needs of any individual case against the needs of all other current cases as well as their own personal needs.
Under English law, if a service provider is induced to deliver services to a dishonest client by a deception, this is an offence under the Theft Act 1978.
8. Monitoring Customer Satisfaction:
Customers do not buy services as such; they buy satisfaction; hence service marketers must be clear about the satisfaction the customer is seeking and check out whether he is actually getting it. Customer satisfaction can be monitored by using several methods, including complaint and suggestion system, customer surveys, comparison shopping etc.
What is Service – Why to Study Customers’ Relationship Marketing in ‘Services’?
In present marketing scenario, the services have been an important aspect. In order to make a worthwhile platform for services, there is a need to study the approaches and essentialities of customers’ relationship patterns.
So, most appropriate causes to study the CRM in services are briefly stated here:
(i) There have been a changing life style of customers as they require most appropriate and prompt services. The entire life style is more or less based on different nature of services,
(ii) There is a need to know about different buying motives of customers. The motives may provide basic direction and parameters to make some fruitful aspects for services,
(iii) There is an utmost need to make some concurrent and personal contact and relations with the target customers for service performance,
(iv) In order to provide some most appropriate and favorable locational advantages particularly for service performance, there is a need to study the customer relationship patterns,
(v) There is a need to study and analyze the composition of customers’ preferences towards different service parameters,
(vi) In order to make wider and most applicable market campaign in service marketing, there is a need to study the CRM in proper way,
(vii) In order to know about the behavioural attitudes and approaches of customers for implementing the service performance, there is a need to study and analyze the pattern of customers’ relationship,
(viii) There is a growing and emerging trends of technological upgradation which are contributing in customers’ social life and are much nearby with service performance. The implementation of such upgradation are based on customers’ relationship patterns and its aspects,
(ix) There are certain limitations and problems within the purview of customers’ profile and preferences. So in order to make some perspective ways and means towards service marketing, there is a need to study the overall scenario of CRM,
(x) The customers’ acquisition and retention are being important and challenging aspects in service areas. These are based on the successful implementation of the concept and methods of customers’ relationship marketing,
(xi) The composition and level of customers’ satisfaction are based on proper customers relationship patterns. So, there is a need to study the CRM particularly for service marketing,
(xii) Within purview of service marketing, there is an utmost need to make more appropriate ways and means to create the societal marketing. For it the platform of CRM is most suitable in market scenario.
(xiii) To search out the potentialities to create and develop the online transactions and Internet design in context of futuristic scenario of CRM.
(xiv) In order to solve different problems and complaints arising out of service performance, it is needful to study overall scenario of CRM.
What is Service – Service Recovery: Meaning, Guidelines Process and Impact
To reduce the effect of service failure on business interests of service companies, service recovery concepts came into force. The emergence of service companies leads to increased customer expectations and thus increased service failure. Due to this, the concept of service recovery has gained importance. Service recovery has been perceived as a satisfactory solution to the problem of service failure.
Grönross found service recovery to be the Service provider’s response in case of service failure. Doing the service right the second time is known as service recovery. Some of the service recovery methods are refunds, compensation, apologies and excuses.
Guidelines for Effective Service Recovery:
A service provider can consider the following aspects for effective service recovery:
1. Measure the Costs- As opposed to chasing new customers, the cost of losing and the benefits of keeping existing customers should be evaluated.
2. Encourage Complaints- Complaints from customers which can be found in customer surveys, monitoring the service delivery process ensures proper customer satisfaction during the service encounter.
3. Anticipation- Services are made of critical incidents where the customer and the service provider interact. The service provider should anticipate where failures might occur in the service delivery process and attempt to minimise the same.
4. Quick Response- Whenever a service failure occurs, the company should respond quickly and then only the recovery effort will be successful.
5. Employee Training- Training should be given to employees to handle the customer needs effectively.
6. Empowerment- Instead of waiting for managerial approval, the frontline service personnel have authority to attend to customer complaints.
7. Close the Loop- Provide feedback to the customer about his complaints and assure him that such failures will not occur in future.
Service Recovery Process:
There are five logical steps in the service recovery process:
1. Acknowledging their Feelings:
Anticipating means understanding customer expectations at key points along the experience pathway. If there is a clear idea about what the customer expects at each junction, one can anticipate and prepare for them. Dissatisfaction results, when we fail to understand and manage the expectations.
The key to success is being able to anticipate the customers’ needs at each step and strive to ensure that processes are in place that will meet and exceed their expectations.
2. Apologising and Owning the Responsibility:
The moment we come to know that expectations are not met, service recovery begins. It is vital that we acknowledge the problem and the customer’s feelings, at that particular point. Perception is the stark reality and it is not the time to argue and explain your position but to accept the responsibility responsibly.
3. Offering Alternatives:
An apology, as simple as it may seem, is an important step in moving the situation away from the negative and into the positive, action-focused arena. An apology is not an admission of guilt.
4. Making Amends:
Offering alternatives whenever possible is a method for helping dissatisfied customers regain a sense of control. Rather than telling customers what they cannot have, focus on options for what is possible. Put them back into the driver’s seat.
5. Anticipating Customer Needs:
Making amends corrects the mistake being made. Simple things like sending a follow up letter, making a sincere apology, a small token or appreciation is all it takes to satisfy the customer.
Impact of Service Failure versus Product Failure- Service Recovery Paradox:
There has been substantial research in traditional services on the effect of service failures and recovery on customer loyalty.
First, service failures have a negative effect on loyalty and have been found to be a driving factor in customer switching.
Second, in the event of a service failure, customers expect effective recoveries and their satisfaction with the recovery increases customer loyalty.
Third, a “recovery paradox” has been proposed where customers who experience a service failure followed by superior recovery exhibit behavioural intentions towards the service provider which are more favourable than they would be had no failure occurred.
A situation where the levels of satisfaction of customers who received good or excellent recoveries are actually higher than those of customers who have not experienced any problem, leading to exceptional service recovery efforts can produce a service “recovery paradox”.
On the other hand, it is clear that an inappropriate response or no response to a service failure, complaint will result in a magnification of negative evaluation, also referred to as “double deviation”.
Magnini et al. presented a notion called the ‘service recovery paradox’. This idea is a good service recovery strategy that enables a firm to build goodwill than if the service failure had never occurred. Initial researchers approved service recovery paradox. But this did not have uniform acceptability and service researches found no relevance of this concept.
Smith and Bolton perceived service recovery paradox as a condition when an effective service recovery results in greater post-recovery satisfaction than that prior to the service failure. Alternative opportunity of increasing customer retention to the service provider as it may result in greater customer satisfaction than in the cast of a failure-free service is offered by the service recovery situation.
Product failure exists when the competitive outcome of markets is not efficient from the point of view of society as a whole. This is usually because the benefits that the free-market confers on individuals or businesses carrying out a particular activity diverge from the benefits of society as a whole.
What is Service – Service Pricing
To manage revenues in ways that support the firm’s profitability objectives is the key goal of effective pricing strategy. The firm has to have a good understanding of its costs, the value created for customers and competitor’s pricing. Demand fluctuates widely, whereas capacity tends to be relatively fixed.
The only function that brings revenues to the organisation is marketing, since all other management functions incur costs. Pricing is the mechanism by which sales are transformed into revenues.
As compared to manufacturing, pricing is more complex in services, since there is no ownership of services, it is more difficult for managers to determine the financial costs of creating a process or performance for a customer than to identify the costs associated with creating and distributing a physical good.
Pricing of goods is determined by the market demand in most cases, unless regulated by the government. The pricing of goods differs from the pricing of services. Price has a single name in the manufacturing sector, whereas it takes different names in the services sector.
For example, the price charged for advertising is known as commission, for boarding and lodging services, as tariff; for legal services and healthcare as fees; and for share or stock services as brokerage and commission.
Price is controlled by different bodies for various services. For example, prices for government provided services like the railways are completely controlled by the government; prices for services like banking, power, telephone, and insurance are partially regulated by the government, prices in hotels, domestic services, auto servicing, personal care services, recreation, etc., vary according to the demand in the market; and prices of advertising services, hospitals, expert services like lawyers and stock brokers are determined by the service providers themselves.
Approaches to Pricing Services:
We discuss below these differences in the context of the three pricing structures typically used to set prices:
1. Cost-based,
2. Competition-based, and
3. Demand-based pricing.
1. Cost-Based Pricing:
In cost-based pricing, a company determines expenses from raw materials and labour, adds amounts or percentages for overhead and profit, and thereby arrives at the price. This method is widely used by industries such as utilities, contracting, wholesaling, and advertising. The basic formula for cost-based pricing is –
Price = Direct costs + Overhead costs + Profit margin
Direct costs involve materials and labour that are associated with delivering the service, overhead costs are a share of fixed costs, and the profit margin is a percentage of full costs (direct + overhead).
Special Challenges in Cost-Based Pricing for Services:
One of the major difficulties in cost-based pricing involves defining the units in which a service is purchased. Thus the price per unit a well-understood concept in pricing of manufactured goods is a vague entity. For this reason many services are sold in terms of input units rather than units of measured output. For example, most professional services (such as consulting, engineering, architecture, psychotherapy, and tutoring) are sold by the hour.
What is unique about services when using cost-based approaches to pricing? First, costs are difficult to trace or calculate in services businesses, particularly where multiple services are provided by the firm.
Consider how difficult it must be for a bank to allocate teller time accurately across its checking, savings, and money market accounts in order to decide what to charge for the services. Second, a major component of cost is employee time rather than materials, and the value of people’s time, particularly non-professional time, is not easy to calculate or estimate.
An added difficulty is that actual service costs may under-represent the value of the service to the customer. A local tailor charges $10 for taking in a seam on a $350 ladies’ suit jacket and an equal $10 for taking in a seam on a pair of $14 sweat shorts. The tailor’s rationale is that both jobs require the same amount of time.
What she neglects to see is that the customer would pay a higher price and might even be happier about the alterations-for the expensive suit jacket, and that $10 is too high a price for the sweat shorts.
Examples of Cost-Based Pricing Strategies Used in Services:
Cost-plus pricing is a commonly used approach in which component costs are calculated and a markup is added.
In product pricing, this approach is quite simple; in service industries, however, it is complicated because the tracking and identification of costs are difficult. The approach is typically used in industries in which cost must be estimated in advance, such as construction, engineering, and advertising.
In construction or engineering, bids are solicited by clients on the basis of the description of the service desired. Using their knowledge of the costs of the components of the service (including the raw materials such as masonry and lumber), labour (including both professional and unskilled), and margin, the company estimates and presents to the client a price for the finished service.
A contingency amount-to cover the possibility that costs may be higher than estimated is also stated because in large projects specifications can change as the service is provided.
Fee for service is the pricing strategy used by professionals; it represents the cost of the time involved in providing the service. Consultants, psychologists, accountants, and lawyers, among other professionals, charge for their services on an hourly basis. Virtually all psychologists and social workers have a set hourly rate they charge to their clients, and most structure their time in increments of an hour.
In the early 1900s, lawyers typically billed clients a certain fee for services rendered regardless of the amount of time they spent delivering them. Then in the 1970s, law firms began to bill on an hourly rate, in part because this approach offered accountability to clients and an internal budgeting system for the firm.
One of the most difficult aspects of this approach is that recordkeeping is tedious for professionals. Lawyers and accountants must keep track of the time they spend for a given client, often down to 10 minute increments.
For this reason the method has been criticised because it does not promote efficiency and sometimes ignores the expertise of the lawyers (those who are very experienced can accomplish much more than novices in a given time period, yet billings do not always reflect this).
Clients also feared padding of their legal bills, and began to audit them. Despite these concerns, the hourly bill dominates the industry, with the majority of revenues billed this way.
2. Competition-Based Pricing:
The competition-based pricing approach focuses on the prices charged by other firms in the same industry or market. Competition-based pricing does not always imply charging the identical rate others charge but rather using others’ prices as an anchor for the firm’s price.
This approach is used predominantly in two situations:
(i) When services are standard across providers, such as in the dry cleaning industry and
(ii) In oligopolies with a few large service providers, such as in the airline or rental car industry.
Difficulties involved in provision of services sometimes make competition-based pricing less simple than it is in goods industries.
Special Challenges in Competition-Based Pricing for Services:
Small firms may charge too little and not make margins high enough to remain in business. Many mom and pop service establishments-dry cleaning, retail, and tax accounting, among others-cannot deliver services at the low prices charged by chain operations.
Further, the heterogeneity of services across and within providers makes this approach complicated. Bank services illustrate the wide disparity in service prices. Customers buying checking accounts, money orders, or foreign currency, to name a few services, find that prices are rarely similar across providers.
Banks claim that they set fees high enough to cover the costs of these services. The wide disparity in prices probably reflects the bank’s difficulty in determining prices as well as their belief that financial customers do not shop around nor discern the differences (if any) among offerings from different providers.
A banking expert makes the point that “It’s not like buying a quart of milk”. Prices aren’t standardised. Only in standardised services (such as dry cleaning) are prices likely to be remembered and compared.
Examples of Competition-Based Pricing in Services Industries:
Price signaling occurs in markets with a high concentration of sellers. In this type of market, any price offered by one company will be matched by competitors to avoid giving a low-cost seller a distinct advantage. The airline industry exemplifies price signaling in services. When any competitor drops the price of routes, others match the lowered price almost immediately.
Going-rate pricing involves charging the most prevalent price in the market. Rental car pricing is an illustration of this technique (and also an illustration of price signaling, because the rental car market is dominated by a small number of large companies). For years, the prices set by one company have been followed by the other companies.
When Hertz instituted a new pricing plan that involved “no mileage charges, ever,” other rental car companies imitated the policy. They then had to raise other factors such as base rates, size and type of car, daily or weekly rates, and drop-off charges to continue to make profits.
Prices in different geographic markets, even cities, depend on the going rate in that location, and customers often pay different rates in contiguous cities in the same state. The newsletter Consumer Reports Travel Letter advises customers that the national toll-free reservation lines offer better rates than are obtained calling local rental car companies in cities, perhaps because those rates are less influenced by the going rates in a particular area.
3. Demand-Based Pricing:
The two approaches to pricing just described are based on the company and its competitors rather than on customers. Neither approach takes into consideration that customers may lack reference prices, may be sensitive to non-monetary prices, and may judge quality on the basis of price.
All these factors can be accounted for in a company’s pricing decisions. The third major approach to pricing, demand-based pricing, involves setting prices consistent with customer perceptions of value. Prices are based on what customers will pay for the services provided.
Special Challenges in Demand-Based Pricing for Services:
One of the major ways that pricing of services differs from pricing of goods in demand- based pricing is that non-monetary costs and benefits must be factored into the calculation of perceived value to the customer. When services require time, inconvenience, and psychological and search costs, the monetary price must be adjusted to compensate.
And when services save time, inconvenience, and psychological and search costs, the customer is willing to pay a higher monetary price. The challenge is to determine the value to customers of each of the non-monetary aspects involved.
Another way services and goods differ with respect to this form of pricing is that information on service costs may be less available to customers, making monetary price not as salient a factor in initial service selection as it is in goods purchasing.
i. Value is Low Price:
Some consumers equate value with low price, indicating that what they have to give up in terms of money is most salient in their perceptions of value, as typified in these representative comments from customers-
a. For dry cleaning- “Value means the lowest price.”
b. For carpet steam cleaning- “Value is price-which one is on sale.”
c. For a fast food restaurant- “When I can use coupons, I feel that the service is a value.”
d. For airline travel- “Value is when airline tickets are discounted.”
ii. Value is whatever I Want in a Product or Service:
Rather than focusing on the money given up, some consumers emphasise the benefits they receive from a service or product as the most important component of value. In this value definition, price is far less important than the quality or features that match what the consumer wants.
In the telecommunications industry, for example, business customers strongly value the reliability of the systems and are willing to pay for the safety and confidentiality of the connections.
Service customers describe this definition of value as follows:
a. For an MBA degree- “Value is the very best education I can get.”
b. For medical services- “Value is high quality.”
c. For a social club- “Value is what makes me look good to my friends and family.”
d. For a rock or country music concert- “Value is the best performance.”
iii. Value is the Quality I Get for the Price I Pay:
Other consumers see value as a tradeoff between the money they give up and the quality they receive.
a. For a hotel for vacation- “Value is price first and quality second.”
b. For a hotel for business travel- “Value is the lowest price for a quality brand,”
c. For a computer services contract- “Value is the same as quality. No-value is affordable quality.”
iv. Value is what I Get for what I Give:
Finally, some consumers consider all the benefits they receive well as all sacrifice components (money, time, effort) when describing value.
a. For a housekeeping service- “Value is how many rooms I can get cleaned for what the price is.”
b. For a hairstylist- “Value is what I pay in cost and time for the look I get.”
c. For executive education- “Value is getting a good educational experience in the shortest time possible.”
The four consumer expressions of value can be captured in one overall definition consistent with the concept of utility in economics. Perceived value is the consumer’s overall assessment of the utility of a service based on perceptions of what is received and what is given.
Although what is received varies across consumers (some may want volume, others high quality, still others convenience), as does what is given (some are concerned only with money expended, others with time and effort), value represents a trade-off of the give and get components.
Customers will make a purchase decision on the basis of perceived value, not solely to minimise the price paid. These definitions are the first step in identifying the elements that must be quantified in setting prices for services.
Costs of Service Delivery:
Service delivery incurs costs. It is necessary to collect data on unit service counts, number of beneficiaries, money spent per unit of service, the time spent on service coordination and delivery, wages and salaries of staff involved in service delivery, and the amount spent on risk/liability prevention since assessment of performance of service delivery in relation to its cost-effectiveness.
The data contains information regarding the areas or the types of services and clients for which financial resources are being used. Whenever there is some inconsistency, corrective actions can be taken as it is easy to find out. If the cost of unit of service is too high, an organisation may not be able to support a loss of funding, because clients will have been accustomed to a level of service that the organisation will no longer be able to afford.
An organisation may not be able to save for an unforeseen event and will be vulnerable to dissolution if funding is lost, if the cost of the unit service is too high. There is a risk of losing community support or receiving pressure to cut services at the expense of quality, if the cost of a unit of service is too high.
When designing delivery systems, organisations use developments in information technology (IT) to rethink -approaches while others choose different ways to deliver the services they offer. It is fair to underline that IT developments have not only reduced costs and lead times within the systems and procedures but have enabled organisations to redesign many of these delivery systems.
The internet offers a lot of capability to personalise the service to the client. Organisations will have to decide the extent to which customers can participate in the creation of the service, when the design of the delivery system takes place.
The next step would be analysis of how the organisation’s current customer service delivery cost structure will be developed and the costs that will be involved for meeting the newly identified service levels by customer segment. Firms that have applied Activity-Based Costing (ABC) will find this to be a straightforward task as without the ABC the analysis will be conducted on a project basis.
An organisation does need to put in place a costing system for analysing costs pertaining to service delivery as well as recovery. The CC can provide a cost-effective solution to service recovery and achieving customer service excellence.
Customer Profitability Measurement:
Customer profitability measurement refers to the allocation of revenues and costs to customer segments or individual customers; such that the profitability of those segments and/or individual customers can be calculated.
The incentive for increasing the attention for CPA is for the following two reasons:
1. The increase of ABCs in the 1990s, led to a rise in the understanding of the extent to which the manufacturing of different products used a firm’s resources.
(a) Firms first find out the cost pools.
(b) For each of these cost pools, cost drivers should be identified.
(c) Costs are then allocated to the cost objects based on the extent to which these objects require certain activities
(d) If it was accepted that not every product requires the same types and same levels of activities, it was a small step to see that customers, too, differ in their consumption of resources
2. Both in type and amount, information technology makes it possible to record and analyse more customer data , since number of sales visits, number of service calls etc. are stored at the level of the individual customer it becomes possible to actually calculate customer profitability.
It is considered good industrial marketing practice to build and nurture profitable relationships with customers. The CPA can deliver knowledge such as how current customer relationships differ in profitability, as well as what customer segments offer higher potential for future profitable customer relationships.
What is Service – Trends in Service Sector for the Different Kinds of Services
There are likely trends in service sector for the different kinds of services.
1. Old Services:
Demand will continue to fall, example, public transport, laundries. However, because these services have a fairly small share in service consumption and output they will have little influences upon services as a whole.
Demand will be fairly close to the trend of output and income in the overall economy, e.g., tourism, health, education, etc. Private consumer demand for leisure and recreation related services may tend to increase faster than personal income if the economy is growing. The resources devoted to new services that are publicly provided, e.g., health and education will be influenced by political decisions.
The complexion of the government in the office will clearly influence what share of resources will be devoted to public services, although this decision in turn will be influenced by factors like the general health of the economy and general demographic trends.
Demand for this will be influenced by the health of sectors which use them. If the fortunes of the manufacturing sector improve then intermediate services will grow. If on the other hand manufacturing continues to stagnate then intermediate services will suffer too. Generally, they have growth faster than manufacturing in the past but it is unlikely that under stagnant conditions they could continue to enjoy such exceptional growth.
As far as internationally traded services are concerned, e.g., tourism financial services their growth is less constrained and could continue to develop but would be particularly influenced by two factors-
(a) Competition
(b) Exchange Rates
Services will continue to be important in the economy and that growth is likely in some sectors reasonable. Even in times of economic decline and stagnation there is evidence to suggest that demand for services is less sensitive to economic fluctuations. But any optimistic forecasts should take account of possible limitations on growth in the service sector. Two forces which could limit their growth are external and internal forces.
This can be illustrated with the example of financial services. The financial services industry has been undergoing significant change in recent years. The rapid pace of this change has left many financial service providers (FSPs) struggling to determine an appropriate strategic direction for the next few years. Many of these FSPs think that they are at a particularly critical juncture and are concerned that a wrong choice could result in their becoming a declining part of the industry.
It is important to specify at the outset the nature of the changes that have been occurring. The underlying functions performed by the financial services industry have not changed, although their relative importance probably has altered overtime. What have been changing are the way services are provided, the instruments used to provide the services, and the nature of the entities providing these services. Changing customer demands have not been an important factor in driving these changes.
Customers have, however, adjusted their behaviour in response to FSP-initiated innovations in services and instruments. Change in the financial services industry is not new. The nature of FSPs, and the processes that they have developed and used to meet customers’ demands for financial service functions, have been undergoing continuous change and this will likely to continue.
What is most striking about the current period is the pace of change in the industry. The scope of current and potential change in instruments, financial service providers, and types of service provided appears greater now than ever before.
Public Sector Banks and Transformation to a True Market Economy:
India has 23 public sector banks, which means they are owned at least 51% by the government. In most cases these are listed companies with a wide variety of investors. While it is now well over a decade since India began its transition from a largely nationalised economy, there is still a long way to go. There is unlikely to be large scale privatisation for the foreseeable future, and in many sectors other than banking there remains a major shift required to move to open market attitudes and competitiveness.
BNP Paribas, tied IT operations in India employs 1,500 people in several locations across the country, providing technology services to the institution globally. Many major financial institutions prefer to run their own Indian IT operations rather than outsourcing, as it gives them a greater degree of control.
Tapping the Bottom of the Pyramid:
One of the key themes in India is bringing those 65% of the population who live at ‘the bottom of the pyramid’, essentially at subsistence levels, into the economy. Most of them do not use financial services. Possibilities to access this market includes using mobiles, the Telco’s extremely broad distribution networks, and battery-powered biometric ATMs. Any technologies need to address limited literacy, for example, by using purely graphical interfaces.
The deputy governor at the Reserve Bank spoke specifically about financial inclusion. Globally two billion people do not have access to financial services. Bank credit has only be used by 4% of the 58 million microbusinesses in the country. Saving accounts, including post office deposits, has increased to 82% from 72%.
Challenges include not just illiteracy but also the diversity of local languages, geographical access in the country’s massive land mass, and simply the cost dynamics of providing services. ‘No-Frills’ accounts have grown from 5,00,000 to 16 million in the last two years. Microfinance borrowers grew from 1.1 million to 7 million from 2003 to 2007. Technology will be essential to give greater access. In addition to the obvious issues of connectivity, one of the most fundamental issues is building credit profiles. Once people have a credit history, they can get greater access to financial services.
An all-star line-up for this panel, including Vikram Akula, Founder of SKS Microfinance and the CEO of Bombay Stock Exchange. There are changing mental models for money in India, shifting from one of transience to one of energy. For affluent people, the increasing complexity of choice is an issue, requiring broader financial education.
Microfinance and Financial Apartheid:
Vikram talked about ‘financial apartheid’ – much of the nations are shackled by the lack of ability to engage with the financial system. However, there is a deep entrepreneurial drive across rural India that can be unleashed. Basic needs include food and shelter, which move on to aspiration education for children and household appliances. Vikram believes that the opportunity at the bottom of the pyramid is as large as that at the top, and what will drive India’s growth.
Moreover, he says, if India does not get financial inclusion soon, there will be a revolt. Microfinance is arguably more financially viable than mainstream banking, with average return on investment in the high 20s. While recent legislation has allowed banks to lend to microfinance institutions, the Reserve Bank still does not allow non-bank financial institutions to lend to microfinance, maintaining financial apartheid. Mobiles will be critical, since 80% of the poorest people do not have access to a bank branch.
Everyone here is aware of India’s ‘demographic advantage’ which means that 50% of the population will be under 25. There is a big contrast with other highly populous nations, with China’s one child policy leading to a rapidly ageing population. Over the decades India’s demographic profile will advantage it more and more.
Just one fifth of the working population in India works in the ‘structured employment’ sector, which means formal companies that are registered, follow employment guidelines, and pay tax. The other 80% of employees work for companies that are outside the formal system. This leads to real challenges for banks wanting to lend to the unstructured sector, including in fulfilling their regulatory requirements.
A panels of the chief executives of India’s largest banks, including State Bank of India, Standard Chartered, ICICI Prudential, etc. There are already 300 million mobile phones in India. State Bank has 16,000 branches, but that’s not enough. Stanchart has 90 branches, which is the most of any foreign bank in the country. Banks need to balance the demands of two segments, the tech-savvy, and those who are new to banking.
In the next 12 years 500 million people will enter the workforce, including 300 million aged 21-29. Balancing the desire for human contact and the need to use technology to extend distribution and reach. There are currently no programme trading or quant investment fund products in India, but there is scope for that.