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Chapter 1: Concept of Services 1

Q1. Characteristics of services: Any 8pts (3C5ID)


The characteristics of services bring out a distinction between goods and services. The main special characteristics
of services are as follows:
1. Intangibility:

Services do not have material form, and therefore, they are intangible.

For instance, Services like banking, insurance, telecom, airlines etc., cannot be possessed like
physical goods

Services cannot be touched, or seen.

2. Inseparability:

Services cannot be easily separated from the service provider.

For instance, a doctor must be physically present at the time of treating the patient.

The production and consumption of services take place at the same time.

3. Inconsistency:

It refers to the variability or heterogeneity in service delivery.

Service performance may differ from one service provider to the other.

For instance, all waiters at a hotel are not equally polite, teachers in a college may teach
differently, and all salespersons may not be equally convincing

4. Inventory- Loss Perish ability:

Services are highly perishable.

Services cannot be stored for future sale.

For instance, spare seats of morning flight of an airline cannot be utilized during the next flight.

5. Interaction:

In services marketing, there is a need fig interaction between the service provider and the customer.

The customer needs to be present at the point of manufacture of service.

This characteristic enables the service provider to customize the services as per the needs of the
customer or a group of customers.

For instance, one customer at a restaurant can order a hit more spicy food and another may order
less spicy food. Also, in the case of hospital, there is a good interaction between the patient and the
doctor.

6. Cannot be returned to Seller Once Used:

A defective computer can be returned back to the seller, but a defective hairstyle or poor quality of
teaching/counseling cannot be returned back to the service provider.

Because of this reason, customers prefer to avail services of highly skilled 1 specialists, may be
even quite a distance away.

7. Can be viewed as a Spectrum:

Services (compared with goods) can also be viewed as a spectrum. Not all products are pure goods,
and so also not all services are pure services.

An example is that of a restaurant, where a waiter's service is intangible, but the food is tangible.

8. Channel of Distribution:

Generally, services are provided directly to the customers.

For instance, if a customer needs bank services or hotel services, the customer may directly go to
the service provider.

9. Difficulty in Valuation of Services:

In case of goods, valuation is easier, especially in the case of cost plus method.

The cost of the goods can easily be identified, but in the case of services, the cost of certain
services is difficult to evaluate.

For instance, the valuation of services of a doctor is difficult.

Q2. Importance of service sector in India

The service sector plays an important role in Indian economy. It Contributes to GDP, provides
employment, generates foreign exchange. Due to exports, etc.

The importance of the service sector in Indian. Economy is explained as follows:

1. Contribution to GDP:

The services sector contributes significantly to the GDP of India.

In 2013-14, the contribution of the services sector to India's

GDP was 60% (at constant - 2004-05 prices)

The increase in the share of GDP of services sector is due to the following reasons:

Professionalism in the services sector.

Increase in Urbanization, which gives boost to services.

Liberalization of the services sector since 1991.

2. Employment:

The services sector provides employment to a large segment of the workforce.

Over the years, there has been steady increase in the share of employment of the services sector.

The share of employment in the services sector is much higher in the urban areas as compared to rural
areas.
3. Contribution to Exports:

India ranks among the top services exporting nations.

Currently India is the 66.1 largest exporters of services in the world.

The services sector has contributed significantly to the foreign exchange earnings of India.

4. Capital Formation:

Services sector contribute towards capital formation in the country.

This is because; the services sector facilitates savings on the part of employees, and service providers.

Also the sub-sectors like banking and insurance encourage savings on the part of the people.

The savings facilitate investment. The investment in turn leads to capital formation in the country.

5. Supports the Primary and Secondary Sector:

Proper functioning of the economy depends upon to a good extent on the services sector.

Without the support of the services sector, the primary and the secondary sector would find it very
difficult to function.
6. Revenue to the Government:

The service sector provides revenue to government by way of service tax.

The service tax was introduce in 1994-95, when it was levied on stockbroker and general insurance.

Over years, the taxable service list has been expanded.

7. Facilitates Regional Development:

Services sector assists in regional development.

By providing services such as transport, banking, communication, etc.,

In various regions, the service sector helps the country to achieve regional development.

8. Social Development:
The services sector facilitates social development. The following services help in social
development:

Educational institutions help in improvement in literacy.

Hospitals and clinics facilitate higher life expectancy.

Media services create social awareness.

Due to the services sector, people are socially developed in terms of literacy, life expectancy and family
welfare.
9. Improves Standard of Living:

The services sector helps to improve standard of living of the people due to the availability of various
types of services such as education, health, recreation and entertainment, and so on.

Also, the services sector Provides employment to millions of people in the country, which in turn
increases income level of those employed.

Q3. Marketing mix for services. (8Ps) All 8 points .


To gain competitive advantage in the market, the service providers must adopt a proper blend of elements to
effectively market the services.
The marketing mix for services consists of 8 elements which are referred to as the 8 Ps of services marketing. The
elements are as follows:
Product People Place Price Promotion Physical Evidence Process Productivity
1. Product :

The service product must be designed properly to create value to the customers.

Service providers must differentiate their service offering in relation to the competitors.

The service product must provide core benefit that responds to the primary need of the customer.

2. People:
Customers often judge quality of service based on their assessment of people providing the services.
Despite technology .advances, many services still require direct interaction between the service staff and the
customers.
The nature of these interactions strongly influences how customers perceive the service quality.
3.

Place and Time:


Service needs to be delivered at the place and time which is convenient to the customers.
Service delivery involves decisions relating to the place and time of delivery.
It also involves decisions regarding the methods and channels used to deliver the services.

Service delivery may involve the use of physical and/or electronic channel depending on the -nature of service.

4. Price
It is the value of the service which the service providers charge the customer.
The service provider must consider certain factors in pricing of services:
o Cost of operation.
o Corporate image of the firm.
o Competition in the market.
5. Promotion:
Promotion refers to the communication-mix that induces the customer to buy the services.
Promotion-mix includes various techniques such as:
o Publicity
o Advertising
o Sales promotion
o Salesmanship, etc
6. Physical Evidence :
Physical evidence is a vital element of services marketing.
Some services are highly intangible, and therefore, physical evidence plays an important role in creating a good
impression on the customer.
The physical environment provides visible cues of the quality of service.
7.

Process :
The service process relates to HOW a service product is delivered to the customers.
It involves the method and the sequence of actions with which the firm delivers the service elements.
The service staff must play an effective- role in the service process.
Customer may also take part in the service process.

8. Productivity and Quality:


Improving productivity and quality of service is vital to the success and survival of the service firm.
Due to stiff competition in the market, the service providers needs to constantly innovate to improve the
productivity as well as the quality of services.
Improvement in Productivity can be undertaken through training and motivating service staff.
In quality should be defined from a customer perspective.
Q4.Trends In Retailing
A number of changes are taking place in the retail sector. Some of the trends in retailing are briefly stated as follows:
1. Growth Rate in Retail Sector:
According to the Global Retail Development Index 2012 of AT Keamey - India remains a high potential market
with annual retail growth of 20 per cent expected over the next five years.
The Indian retail industry is pegged at over US $ 500 billion in 2012 and is expected to reach US $ 1.3 trillion by
2020.
Specially, the organized retail trade is expected to grow at a considerably at about 25% per annum. There are
several studies that conform to the high growth rate in the organized services sector.
2. Share in GDP:
Currently, India's retail trade is the largest sub sector of services, accounting for over 10 percent of the country's
GDP.
Retail in India has emerged as one of the most dynamic and fast growing sectors with several players entering the
market.
Currently, India's retail is the 5 Largest in the world, which may be No.1 in the world by 2050.
3. Share in Employment:
India's retail trade contributes significantly to employment in India.
Currently, it employs over 8% of the total workforce in the country.

In absolute terms, retail trade employs over 44 million people in the country.
Retailing in India is gradually inching its way to becoming the next boom industry.
The whole concept of shopping has altered in terms of format and consumer buying behavior, ushering in a
revolution in shopping.
Therefore, it is expected that the employment in this sector is likely to increase considerably in the near future.
4. Entry of Corporate:
Nowadays, there is a growing trend of corporate entering the retail field.
A number of corporate entities have entered the organized retail trade.
Heavy investments have been made by large corporate such as the Tatas, Birlas, K.K. Raheja, and others.
Also, foreign retail firms like Tesco and others have shown keen interest in India's retail trade.
5. Trends in Food and Grocery Business:
Food and grocery stores account for the largest share of retail (about 60% of total retail business).
In 2007, nearly 99 per cent of food and grocery market was in the unorganized sector.
This would change in the next few years as it is estimated that food and grocery revenue in the organized retail
would increase considerably.
6. Trends in FDI:
On 14th September 2012, the Government of India announced the opening of FDI in multi brand retail, (up to
51%) subject to approvals by individual states.
This decision has been welcomed by economists and the markets.
However, this decision has caused protests in India by certain political parties.
7. Training to Retail Personnel:
Prior to 2000, there was hardly any emphasis on training in the retail sector.
With the entry of organized retailers, emphasis is placed on training and development of retail personnel.
The need for specialized skills is increasingly felt in the areas of:
Strategic management Merchandise management Store management Administrative
of organized outlets. Increasing investment by the corporate in the retail sector. Availability of quality reality
space in metros.
8. Increased Interest by Overseas Retailers:
There is a growing interest of overseas retailers to set up retail outlets in India.
For example: Wal-Mart has huge plans for retail business India. Wal-Mart, the world's largest retailer, and Bharti
Enterprises have signed a Memorandum of Understanding (MoU) to explore business opportunities in the Indian
retail industry.
Tommy Hilfiger, retailer of apparels, has already set up stores in metros and planning for more such stores in the
near future.
9. Technology in Retailing:
There is a growing trend of the use of IT in retailing business.
Computerization is increasingly used in almost all operations in the organized sector, such as billing, inventory
management, accounting, and so on.
It is technology that will help the organized retailer score over the unorganized players, giving both cost and
service advantages.
10. Growth of On-line Retail:
There is a growing trend towards on-line retail trade.
A number of on-line sites have been. set up, and the number of on-line sites is increasing every year.
Some of the popular on-line marketers include Amazon, Flipkart, Snapdeal, Junglee, and others.
In India, the e-commerce sales touched US $ 70 billion in 2011 and expected to increase to US $ 200 billion in
2020.

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