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Services as part of GDP
Series1
0 10 20 30 40 50 60 70 80
38
52.3
48
77
42
53.7
56.5Sri LankaPakistanNepalMaldivesIndiaBangladeshAfghanistan
Bowen & Ford‘it seems reasonable to expect that there are differences between managing an organization that produces something that can be seen, touched and held and managing an organization that produces something that is perceived, sensed and experienced’
Rathmell
A good is a thing
It is an object, an article, a device or a material
A service is an act
It is a deed, a performance, or an effort
What is a Service?You don’t own the hotel
room in which you stayed the night before
You don’t get to bring Bono home from his concert
There is no transfer of ownership
LovelockServices involve a form of rentalCustomers obtain benefits by “renting”
the right to ◦use a physical object◦To hire the labor and expertise of
personnel◦To pay for access to facilities and networks
Value is created when customers benefit from obtaining desired experiences and solutions.
Definition: ServicesServices are economic activities offered by one party to another, most commonly employing time-based performances to bring about desired results in recipients themselves or in objects or other assets for which purchasers have responsibility.
In exchange for their money, time and effort, service customers expect to obtain value from access to goods, labor, professional skills, facilities, networks and systems; but they do not normally take ownership of any of the physical elements involved.
5 Categories of Services Rented goods services - enables customers to
obtain the temporary right to exclusive use of a physical good that they prefer not to own.
5 Categories of ServicesDefined space and place rentals –
customers obtain use of a defined portion of a larger space in a building, vehicle or other area, sharing its use with other customers under varying levels of privacy.
5 Categories of ServicesLabor and expertise rentals –
customers hire other people to perform work that they either choose not to do for themselves or are unable to do because they lack the necessary expertise, tools or skills.
5 Categories of ServicesAccess to shared physical
environments – it may take place either indoors or outdoors, or a combination of both.
5 Categories of ServicesSystems and networks: access and
usage – customers rent the right to participate in a specified network such as telecommunications, utilities, banking, insurance or specialized information services.
Characteristics of ServicesIntangibility
Inseparability (simultaneous production & consumption)
Variability (heterogeneity)
Perishability
Differences: Products & Services
Most services cannot be inventoriedIntangible elements usually dominate
value creationServices are often difficult to visualize
and understandCustomers may be involved in co-
production
Differences: Products & Services
People may be part of the service experience
Operational inputs and outputs tend to vary more widely
The time factor often assumes great importance
Distribution may take place through non-physical channels
Extended Marketing Mix
Physical Env
Process
Productivity &
QualityPeople
PriceProduct
PromotionPlace
ProcessHow a firm does things – the
underlying processes – is often as important as what it does, particularly if the product is a rather mundane one offered by many competitors.
Example: Think about depositing a cheque in HSBC, and another in Janata Bank.
PeopleMost services will always require
direct interaction between customers and contact personnel. The nature of these interactions strongly influences how customers perceive service quality.
Physical EnvironmentThe appearance and interior designs
of buildings, landscaping, vehicles, interior furnishing, equipment, staff members’ uniforms, signs, printed materials, and other visible cues all provide tangible evidence of a firm’s service quality.
Productivity and QualityThey are flips sides of a coin – often one
comes at the cost of another. Striking a proper balance between the two is very important.◦ Improving productivity by causing
inappropriate cuts in service is undesirable.◦ Similarly, in trying to improve quality, if we
make it too expensive for the customers, we shall lose business.