Defining Services and understanding service economy

What are services?

A service is an intangible offer that one party makes to another in exchange for money or any other valuable thing. But the party who provide service does not get the ownership of anything.

Services marketers and managers must appreciate that customers are often buying an experience that needs to be staged, managed, and performed with care.

Understanding the Service Economy

Collectively, the output of different service industries (plus that of government and non-profit organizations) accounts for 70-80% of GDP in many industrial nations. 

In the next decade, 90-95% of all new jobs created in developed countries are expected to be in the service sector. Services also play a key role in the economies of developing nations such as Thailand, Malaysia, China, and Indonesia. Where services account for some 50% of GDP. 

  • Changing patterns of government regulations
  • Relaxation of professional association standards restricting overt marketing communications efforts
  • Privatization of public corporations and non-profit organizations
  • Technological innovations, including computerization and advances in telecommunications
  • The growth of service chains (both companies owned and franchised)
  • Creation of service profit centers within manufacturing firms
  • Financial pressures on public and non-profit organizations to find new income sources
  • Globalization of service businesses
  • The service quality movement
  • Higher customer expectations
  • Increased leisure time
  • The hiring and promotion of innovative managers
Defining Services and understanding service economy
Defining Services and understanding service economy
Analyzing Services Marketing accommodates
  • The significance of the service employee/customer relationship
  • The importance of internal as well as external marketing
  • The importance of customer retention
  • The fact that satisfaction, service quality and brand loyalty are management imperatives for staff as well as customers
Further Challenges for Service Managers
  • Differentiation and competitive advantage may be difficult to achieve
  • The marketing orientation is still relatively new to many managers of service firms
  • Operations management, rather than marketing, continues to dominate in many service industries
  • Customer service management and marketing is often in the hands of many lower paid subordinates, possibly in multiple locations
  • Limited data on competitive performance
  • Problems in determining costs for pricing purposes
Defining Services and understanding service economy
Defining Services and understanding service economy
Concluding Note: 

We suggest that students be encouraged to interview someone with senior level marketing and/or customer service management responsibilities within a local service organization of their choice. 

They should seek to understand the nature of the job, what it entails and demands in terms of prior experience, skills, training, and customer contact; what, from the manager’s perspective, is crucial to satisfying and retaining their customers; and what are significant marketing and management challenges.

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