SERVICES

MARKETING
Unit - 1 Material

Dr. THERA RAJESH

M.Com, MBA (MM), MBA (HRM), Ph.D.
Professor
Department of Management Studies
MBA Programme
Sir C R Reddy College PG Courses
Eluru – 534007
W.G.Dt. A.P

Cell.No: 9949726373
Email: [email protected]

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 MM- 305: SERVICES MARKETING
Unit - I: Topics
Introduction to Services Marketing: Importance and Characteristics of Services:
Growth of Services Sector; Services in the Indian Economy: Services Strategy.

Introduction
A Service is an act or performance offered by on party to another. The service sector is
becoming the primary source of wealth trade and growth through out the developed world. The
service sector plays a vital role in an economy and in shaping its future. The economies of the world
are now dominated by services, which account for nearly two thirds of GDP and employment.

Services are not limited to service industries, services can be very profitable, and services
are challenging to manage and market. Services represent a huge and growing percentage of the
world economy.

In the simplest term, services are deeds, processes, and performances. The performance is
essentially intangible. Services are an economic activity that create value and provides benefits for
customers’ specific time and places.

Definitions:
According to Kotler and Armstrong (1991)
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.

According to the Service Industries Journal Defines:

Service as any primary or complimentary activity that does not directly produce a physical
product, that is, the non goods part of transaction between buyer (Customer) and Seller (Provider).

According to Stanton:
Services are those separately identifiable, essentially intangible activities, which provide
want-satisfaction when marketed to consumers and/or industrial uses and which are not necessarily
tied to the sale a product or another service.

Importance of Services Marketing

In this, the Five Key facts are involved in the services Marketing.
➢ An overall perspective that guides decisions in all areas of Management.
➢ Customer Focus.
➢ A Holistic approach to cross-functions collaboration.
➢ A emphasis on quality and
➢ Internal development personnel.

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The 8 Components (8Ps) of Integrated Service Management
Service Management draws insights from business practice and from marketing, Operations,
HR, Service Quality Management, Organizational Theory and Economics.

Fig: The eight components of integrated (8Ps) Service Management:

Product Elements
Managers must select the features of both the core product and the bundle of supplementary
service elements surrounding it, with reference to the benefits desired by customers and how well
competing products perform.

Price
This component addresses management of the outlays incurred by customers in obtaining
benefits from the service product. Responsibilities are not limited to the traditional pricing tasks of
establishing the selling price to customers, which typically include setting trade margins and
establishing credit terms. Service managers also recognize and, where practical, seek to minimize
other costs and burdens that customers may bear in purchasing and using a service, including
additional financial expenditures, time, mental and physical effort, and negative sensory
experiences.

Place
Delivering product elements to customers involves decisions on both the place and time of
delivery and may involve physical or electronic distribution channels (or both), depending on the
nature of the service being provided. Messaging services and the Internet allow information-based
services to be delivered in cyberspace for retrieval by telephone or computer wherever and
whenever it suits the customer.

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 Firms may deliver service directly to their customers or through intermediary organizations
like retail outlets owned by other companies, which receive a fee or percentage of the selling price
to perform certain tasks associated with sales, service, and customer-contact. Customer expectations
of speed and convenience are becoming important determinants in service delivery strategy.

Promotion
No marketing program can succeed without an effective communication program. This
component plays three vital roles: providing needed information and advice, persuading target
customers of the merits of a specific product, and encouraging them to take action at specific times.
In service marketing, much communication is educational in nature, especially for new
customers. Companies may need to teach these customers about the benefits of the service,
where and when to obtain it, and how to participate effectively in service processes.
Communications can be delivered by individuals, such as salespeople and trainers, or through such
media as TV, radio, newspapers, magazines, billboards, brochures, and Web sites.

Productivity
These elements, often treated separately, should be seen as two sides of the same coin. No
service firm can afford to address either element in isolation. Improved productivity is essential to
keep costs under control but managers must beware of making inappropriate cuts in service levels
that are resented by customers (and perhaps by employees, too).
Service quality, as defined by customers, is essential for product differentiation and for
building customer loyalty. However, investing in quality improvement without understanding the
trade-off between incremental costs and incremental revenues may place the profitability of the
firm at risk.

People
Many services depend on direct, personal interaction between customers and a firm's
employees (like getting a haircut or eating at a restaurant). The nature of these interactions strongly
influences the customer’s perceptions of service quality.
Customers often judge the quality of the service they receive largely on their assessment of
the people providing the service. Successful service firms devote significant effort to recruiting,
training, and motivating their personnel, especially—but not exclusively— those who are in direct
contact with customers.

Process
Creating and delivering product elements to customers requires the design and
implementation of effective processes. A process describes the method and sequence in which serve
operating systems work.
Badly designed processes are likely to annoy customers because of slow, bureaucratic, and
ineffective service delivery. Similarly, poor processes make it difficult for front-line staff to do their
jobs well, result in low productivity, and increase the likelihood of service failures.

Physical Evidence

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 The appearance of buildings, landscaping, vehicles, interior furnishing, equipment, staff
members, signs, printed materials, and other visible cues all provide tangible evidence of a firm’s
service style and quality. Service firms need to manage physical evidence carefully because it can
have a profound impact on customers’ impressions. In services with few tangible elements, such
as insurance, advertising is often employed to create meaningful symbols. For instance, an umbrella
may symbolize protection, and a fortress, security.

Services Mix Elements (7Ps)

Services marketing mix is predominantly governed by the 7 Ps of marketing namely
Product, Price, Place, Promotion, People, Process and Physical evidence. The 7 P frameworks is
one of the most popular frameworks for deciding a marketing strategy, right from strategy
formulation to actual implementation.

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 The service marketing mix is also known as an extended marketing mix and is an integral
part of a service blueprint design. The service marketing mix consists of 7 P’s as compared to the 4
P’s of a product marketing mix. Simply said, the service marketing mix assumes the service as
a product itself. However it adds 3 more P’s which are required for optimum service delivery.
The product marketing mix consists of the 4 P’s which are Product, Pricing, Promotions and
Placement. These are discussed in my article on product marketing mix – the 4P’s.
The extended service marketing mix places 3 further P’s which include People, Process
and Physical evidence. All of these factors are necessary for optimum service delivery. Let us
discuss the same in further detail.

Product
The product in service marketing mix is intangible in nature. Like physical products such as
soap or a detergent, service products cannot be measured. Tourism industry or the education
industry can be an excellent example. At the same time service products
are heterogeneous, perishable and cannot be owned.
The service product thus has to be designed with care. Generally service blue printing is
done to define the service product. For example – a restaurant blue print will be prepared before
establishing a restaurant business. This service blue print defines exactly how the product (in this
case the restaurant) is going to be.

Place
Place in case of services determine where is the service product going to be located. The
best place to open up a petrol pump is on the highway or in the city. A place where there is minimum
traffic is a wrong location to start a petrol pump. Similarly a software company will be better placed
in a business hub with a lot of companies nearby rather than being placed in a town or rural area.
Read more about the role of business locations or Place element.

Promotion
Promotions have become a critical factor in the service marketing mix. Services are easy to
be duplicated and hence it is generally the brand which sets a service apart from its counterpart.
You will find a lot of banks and telecom companies promoting them rigorously. Why is that? It is
because competition in this service sector is generally high and promotions are necessary to survive.
Thus banks, IT companies, and dotcoms place themselves above the rest by advertising or
promotions.

Pricing
Pricing in case of services is rather more difficult than in case of products. If you were a
restaurant owner, you can price people only for the food you are serving. But then who will pay for
the nice ambiance you have built up for your customers? Who will pay for the band you have for
music? Thus these elements have to be taken into consideration while costing. Generally
service pricing involves taking into consideration labor, material cost and overhead costs. By

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adding a profit mark up you get your final service pricing. You can also read about pricing
strategies. Here on we start towards the extended service marketing mix.

People
People are one of the elements of service marketing mix. People define a service. If you
have an IT company, your software engineers define you. If you have a restaurant, your chef and
service staff defines you. If you are into banking, an employee in your branch and their behavior
towards customers defines you. In case of service marketing, people can make or break an
organization.
Thus many companies nowadays are involved into specially getting their staff trained in
interpersonal skills and customer service with a focus towards customer satisfaction. In fact many
companies have to undergo accreditation to show that their staffs are better than the rest. Definitely
a USP in case of services.

Process
Service process is the way in which a service is delivered to the end customer. Lets take the
example of two very good companies – Mcdonalds and Fedex. Both the companies thrive on their
quick service and the reason they can do that is their confidence on their processes.
On top of it, the demand of these services is such that they have to deliver optimally without
a loss in quality. Thus the process of a service company in delivering its product is of utmost
importance. It is also a critical component in the service blueprint, wherein before establishing the
service, the company defines exactly what should be the process of the service product reaching the
end customer.

Physical Evidence
The last element in the service marketing mix is a very important element. As said before,
services are intangible in nature. However, to create a better customer experience tangible elements
are also delivered with the service. Take an example of a restaurant which has only chairs and tables
and good food, or a restaurant which has ambient lighting, nice music along with good seating
arrangement and this also serves good food. Which one will you prefer? The one with the nice
ambience. That’s physical evidence.
Several times, physical evidence is used as a differentiator in service marketing. Imagine a
private hospital and a government hospital. A private hospital will have plush offices and well
dressed staff. Same cannot be said for a government hospital. Thus physical evidence acts as a
differentiator.
So next time someone asks what do you mean by service marketing mix or What are the
7 P’s, then you know the answer. This is the service marketing mix (7p) which is also known as the
extended marketing mix.

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Marketing Mix Elements 4P’s
The term 'marketing mix' is a foundation model for businesses, historically cantered on
product, price, place, and promotion. The marketing mix has been defined as the "set of marketing
tools that the firm uses to pursue its marketing objectives in the target market".

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 Marketing is simplistically defined as ‘putting the right product in the right place, at the right
price, at the right time.’ Though this sounds like an easy enough proposition, a lot of hard work
and research needs to go into setting this simple definition up. And if even one element is off the
mark, a promising product or service can fail completely and end up costing the company
substantially.
The use of a marketing mix is an excellent way to help ensure that ‘putting the right product
in the right place,’ will happen. The marketing mix is a crucial tool to help understand what the
product or service can offer and how to plan for a successful product offering. The marketing
mix is most commonly executed through the 4 P’s of marketing: Price, Product, Promotion,
and Place.
These have been extensively added to and expanded through additional P’s and even a 4C
concept. But the 4Ps serve as a great place to start planning for the product or even to evaluate an
existing product offering.
Product
The product is either a tangible good or an intangible service that is seem to meet a specific
customer need or demand. All products follow a logical product life cycle and it is vital for
marketers to understand and plan for the various stages and their unique challenges. It is key to
understand those problems that the product is attempting to solve. The benefits offered by the
product and all its features need to be understood and the unique selling proposition of the product
need to be studied. In addition, the potential buyers of the product need to be identified and
understood.
Price
Price covers the actual amount the end user is expected to pay for a product. How a product
is priced will directly affect how it sells. This is linked to what the perceived value of the product
is to the customer rather than an objective costing of the product on offer. If a product is priced
higher or lower than its perceived value, then it will not sell. This is why it is imperative to
understand how a customer sees what you are selling. If there is a positive customer value, than a
product may be successfully priced higher than its objective monetary value. Conversely, if a
product has little value in the eyes of the consumer, then it may need to be underpriced to sell. Price
may also be affected by distribution plans, value chain costs and mark-ups and how competitors
price a rival product.
Place
Place or placement has to do with how the product will be provided to the customer.
Distribution is a key element of placement. The placement strategy will help assess what channel is
the most suited to a product. How a product is accessed by the end user also needs to compliment
the rest of the product strategy.
Promotion
The marketing communication strategies and techniques all fall under the promotion
heading. These may include advertising, sales promotions, special offers and public relations.
Whatever the channel used, it is necessary for it to be suitable for the product, the price and the end
user it is being marketed to. It is important to differentiate between marketing and promotion.
Promotion is just the communication aspect of the entire marketing function.

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 Differences between Physical Goods and Services
Physical Goods Services
1. Good or Tangible 1. Services are Intangible
(That can be Perceived by touch; (That cannot be touched and that
real proof for eg. Business cannot be grasped by the mind for
Company and its building etc.) eg. A good reputation)
2. Goods are Physical (Tangible) 2. Services are non-physical
(Intangible)
3. Goods are Produced 3. Services are performed
4. Goods are characterized by 4. Services are characterized by
Homogeneous (Formed of Parts) Heterogeneous (It’s made up of
different kinds, it is depends on
customer satisfaction on
employee action)
5. Production and distribution are 5. Services are in Production,
separated from consumption (For Distribution, and Consumption
eg. Gas) are simultaneous process (For eg.
Hospitality)
6. Goods are things 6. Services are an activity or
Process.
7. Core Value Produced in a factory 7. Core Value Produced in Buyer-
Seller interaction
8. Customers don’t participate in the 8. Customers are participating in the
production process. production.
9. Goods can be kept in stock. 9. Services cannot be kept in stock.
10. Transfer of ownership. 10. No transfer of ownership.
11. Repairs are possible. 11. Repairs are Impossible.
12. Replacement is common 12. Replacements are rare.
13. Image depends on Brand. 13. Image depends on Corporate
Sector,
14. Goods focus on Customer Need. 14. Services focus on Customer
expectations.
15. Goods are External Marketing 15. Services are both Internal, and
Strategy orientation. External Marketing Strategy
orientation.
16. Quality depends on the 16. Quality depends on Persons
Standardization. Feelings.

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 17. Customer involvement is Low or 17. Customer involment is High or
Not need/absent Need.
18. Production Planning is Possible. 18. Production Planning is im-
possible.
19. Forecasting is Long-run. 19. Forecasting is short-run.
20. Satisfaction is based on more 20. Satisfaction is based on more
physical. emotional.
21. Pricing depends on the Material 21. Pricing depends on Labor based
based.
22. Basis of competition is 22. Basis of competition is
Technology based. personalization based.

Characteristics of Services
Kotler as identified a major characteristics. That makes them so different from products.
Characteristics of Services
In the following, we will go into the most relevant characteristics of services. Characteristics of
services apply universally to any service. The most important characteristics of services are:
1. Intangibility
2. Inseparability
3. Heterogeneity/Variability
4. Perishability

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 Analysis of Services Characteristics

Fig: Major Characteristics of Service Marketing

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Definition and characteristics of Services
The American Marketing Association defines services as - “Activities, benefits and
satisfactions which are offered for sale or are provided in connection with the sale of goods.”
The defining characteristics of a service are:

1. Intangibility: Services are intangible and do not have a physical existence. Hence services
cannot be touched, held, tasted or smelt. This is most defining feature of a service and that
which primarily differentiates it from a product. Also, it poses a unique challenge to those
engaged in marketing a service as they need to attach tangible attributes to an otherwise
intangible offering.
Intangible Features:
➢ A Service Cannot be touched
➢ Standardisation is not possible
➢ There is now ownership transfer
➢ A service Cannot be patented
➢ Production and consumption are inseparable
➢ There are no inventories of the service
➢ Middleman roles are different.

2. Inseparability/Simultaneity of production and consumption: This refers to the fact that

services are generated and consumed within the same time frame. Eg: a haircut is delivered
to and consumed by a customer simultaneously unlike, say, a takeaway burger which the
customer may consume even after a few hours of purchase. Moreover, it is very difficult to
separate a service from the service provider. Eg: the barber is necessarily a part of the service
of a haircut that he is delivering to his customer.

3. Heterogeneity/Variability: Given the very nature of services, each service offering is

unique and cannot be exactly repeated even by the same service provider. While products
can be mass produced and be homogenous the same is not true of services. eg: All burgers
of a particular flavour at McDonalds are almost identical. However, the same is not true of
the service rendered by the same counter staff consecutively to two customers.

4. Perishability: Services cannot be stored, saved, returned or resold once they have been
used. Once rendered to a customer the service is completely consumed and cannot be
delivered to another customer. eg: A customer dissatisfied with the services of a barber
cannot return the service of the haircut that was rendered to him. At the most he may decide
not to visit that particular barber in the future.

Growth of Services Sector

Reasons for Growth in Service Sector
Main reasons behind the growth of services include rapid urbanization, the expansion of the
public sector and increased demand for intermediate and final consumer services. Access to
efficient services has become crucial for the productivity and competitiveness of the
entire economy.

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 The trends indicate the future belongs to the service. What are the factors, which have
contributed to the growth? We may classify the environment factors into
➢ Demographic Changes
➢ Economic Changes
➢ Political and Legal Changes
➢ Social Changes
➢ Technological Changes
Demographic Changes
This study is depending on the statistics of births, deaths, diseases etc; to show the condition
of a community. The study of population reveals a
➢ General increase in the world population
➢ High birth rate has given scope for child care centers.
➢ Educational Institutions etc.,
As a baby boom generation began entering its years of prime capacity in the late eighties it
became a prime target for a variety of services.
➢ Fast Food
➢ Entertainment etc.,
The considerable increase in life expectancy indicated expanding market in the age group
over 65 years. This has created a new market for health care, leisure and tourism. There has been
a movement of population from rural to urban areas for over a country, and also shift from city to
the suburbs. This again causes the need for;
➢ Infrastructure
➢ Support Services.
Economic Changes
The growth of corporate sector and market is usually an indicator of growth of an economy
with an overall economic liberalization. Resource mobilization through capital market. The growth
of large firms has brought about greater dependence on special service providers like market
research and advertising agencies.
The economic reforms have use hired consumerism. Moreover, there have been changes in
the “Consumer Purchasing Power” and spending patterns with middle class explosion which is now
emerging as the consumption community.

Political and Legal Changes

De-regularization has opened many services industries like Airline Service, Banking Service
etc., to more intense competition generating greater innovation and expansion. At the same time
many countries continue to strengthen consumer protection laws to improve public security and to
protect the environment.
The increase in Govt. interactions in the trade sector has increased trade relationships
between nations leading to development of tourism and hotel industry.

Social Changes
The increase in single person house hold smaller families and working women mean more
discretionary income, more time for travel and entertainment and also need for child care service.
Changing life style of the masses due to cultural exchange and communication networks has
resulted in continued emphasis on services.
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Technological Changes
Recent developments in computer science and information Technology nave brought about
convergence of various technologies like.
➢ Tele Communications
➢ Entertainment
➢ Data Transmission
The influence of internet has resulted in increasing mobility of educated labour force among
countries, and in many service industries like;
➢ Travel
➢ Banking
➢ Education
➢ Financial Services
➢ Insurance etc;

Services in the Indian Economy

India has the fastest growing (9.2 percent in 2015-16) service sector in the world with the
lowest share of services employment (28 percent in 2014), contributing about 66 percent to
the Indian GDP. ... This further increases the importance of services in the economy and job
creation.
The service sector consists of the soft parts of the economy such as insurance, government,
tourism, banking, retail, education, and social services. Currently service sector is contributing near
about 60 % of Indian GDP. Service sector is also known as tertiary sector.
Services sector growth is governed by both domestic and global factors. The Indian facilities
management market is expected to grow at 17 per cent CAGR between 2015 and 2020 and surpass
the US$19 billion mark supported by booming real estate, retail, and hospitality sectors.
The services sector is a key driver of India's economic growth. The sector contributed 55.39
per cent to India's Gross Value Added at current price in FY20*. Services sector's GVA grew at a
CAGR of 1.45 per cent to US$ 1,064.8 billion in FY20 from US$ 1,005 billion in FY16.

Introduction to the Service Sector in India

The growth of the Services Sector in India is a unique example of leap-frogging traditional
models of economic growth. Within a short span of 50 years since independence, the contribution
of the service sector in India to the country’s GDP is a lion’s share of over 60%. However, it still
employs only 25% of the labour force. Consequently, agriculture (which is stagnant) and
manufacturing (which has not yet risen to its full potential) continue to sustain the majority of our
employed population. This presents a unique challenge to future economic growth in India and
requires out of the box solutions that will help rapidly harness the potential of the service industry
in India. Invest India takes a look at the contribution of the services sector in the Indian economy,
its successes and also explores potential enablers for future equitable economic growth.

Market Size of Service Industry

A quick comparison with the American and Chinese economy reveals the unique nature of
India’s GDP growth from the contribution of the Service sector and its linkages to employment and
income distribution (Figures in bracket indicate employment). Over time, a robust manufacturing
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and productive agriculture sector leads to the Service industry in India becoming the mainstay of
GDP and employment. In our context, the Service sector has become extremely important to grow
not only our GDP, as well as make it the key vehicle for employment generation. However, the
question is - how to increase value adds to GDP from Service companies in India, while reducing
employment dependency from agriculture, as well as boosting the manufacturing industry.

Sector Wise Contributions

Sector Particulars India USA China
15.40 8.00 7.00
Agriculture and Allied (53.00) (2.00) (26.00)

Manufacturing and 23.00 12.00 40.00

Industry (22.00) (19.00) (28.00)

61.50 80.00 52.00

Services* (25.00) (79.00) (46.00)
(*IT contributes the majority)

The current growth of service sector in India is based mainly on labour market arbitrage.
Moving forward, India can no longer rely on ‘low cost’ for ‘low value added’ services. Therefore,
we need solutions that address these:
❖ Boosting the manufacturing sector with both direct and indirect spin - off benefits
for the growth of the service sector in India (e.g. Make in India)
❖ Moving up the value chain, especially in the IT/ ITeS sector.
❖ Broad - basing the Indian Services offering platform into sectors beyond the
traditional IT/ ITeS by identifying the global demand for such services, and meeting
these demands based on our natural competencies and comparative advantages.

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Introduction
The services sector is not only the dominant sector in India’s GDP, but has also attracted
significant foreign investment, has contributed significantly to export and has provided large-scale
employment. India’s services sector covers a wide variety of activities such as trade, hotel and
restaurants, transport, storage and communication, financing, insurance, real estate, business
services, community, social and personal services, and services associated with construction.
As of 2018, 31.45 per cent of India’s employed population is working in the services sector.

Market Size
The services sector is a key driver of India’s economic growth. The sector contributed 55.39
per cent to India’s Gross Value Added at current price in FY20*. Services sector’s GVA grew at a
CAGR of 1.45 per cent to US$ 1,064.8 billion in FY20 from US$ 1,005 billion in FY16. Net export
estimate in FY20 from services stood at US$ 214.14 billion, while import was at US$ 131.41 billion
in FY20. Nikkei India Services Purchasing Managers' Index (PMI) stood at 14.6 in May 2020,
indicating a contraction as COVID-19 led shutdown impaired businesses.

Investments
➢ Some of the developments and major investments by companies in the services
sector in the recent past are as follows:
➢ Services sector is the largest recipient of FDI in India with inflow of US$ 82 billion
between April 2000 and March 2020.
➢ In June 2020, Jio Platforms Ltd. sold 22.38 per cent stake worth Rs 1.04 trillion (US$
14.75 billion) to ten global investors in a span of eight weeks under separate deals,
involving Facebook, Silver Lake, Vista, General Atlantic, Mubadala, Abu Dhabi
Investment Authority (ADIA), TPG Capital and L. Catterton. This is the largest
continuous fundraise by any company in the world.
➢ In February 2020, Novartis launched Biome India, a digital innovation hub, in
Hyderabad, its first such centre in Asia and the fourth globally.
➢ Indian healthcare companies are entering into mergers and acquisition (M&A) with
domestic and foreign companies to drive growth and gain new markets.

Government Initiatives
➢ The Government of India recognises the importance of promoting growth in services
sector and provides several incentives across a wide variety of sectors like health
care, tourism, education, engineering, communications, transportation, information
technology, banking, finance and management among others.
➢ The Government of India has adopted few initiatives in the recent past, some of these
are as follows:
➢ The Cabinet Committee on Economic Affairs has given its approval for continuation
of the process of recapitalization of Regional Rural Banks (RRBs) by providing
minimum regulatory capital to RRBs for another year beyond 2019-20.
➢ Government of India has launched the National Broadband Mission with an aim to
provide Broadband access to all villages by 2022.
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 ➢ Under the Mid-Term Review of Foreign Trade Policy (2015-20), the Central
Government increased incentives provided under Services Exports from India
Scheme (SEIS) by two per cent.
➢ Government of India has been working to remove many trade barriers to services,
for which it tabled a draft legal text on Trade Facilitation in Services to the WTO in
2017.
Achievements
Following are the achievements of the Government in the past four years:
➢ India’s rank jumped to 22 in 2019 from 137 in 2014 on World Bank’s Ease of doing
business - Getting Electricity ranking.
➢ Ministry of Tourism sanctioned 18 projects covering all the Northeast States for Rs
1,456 crore (US$ 211.35 million) for development and promotion of tourism in the
region under Swadesh Drashan and PRASHAD schemes.
➢ A total of 11 projects worth Rs 824.80 crore (US$ 127.98 million) were sanctioned
under the Swadesh Darshan scheme. During 2019-20, an additional fund Rs 1,854.67
crore (US$ 269.22 million) was sanctioned for new projects under this scheme.
➢ Statue of Sardar Vallabhbhai Patel, also known as ‘Statue of Unity’, was inaugurated
in October 2018 and the total revenue generated till November 2019 stood at Rs
82.51 crore (US$ 11.81 million).
➢ IT-BPM industry’s revenue was estimated at around US$ 191 billion in FY20 with
a growth rate of 7.7 per cent.
Road Ahead
➢ Services sector growth is governed by domestic and global factors. The Indian
facilities management market is expected to grow at 17 per cent CAGR between
2015 and 2020 and surpass the US$ 19 billion mark supported by booming real
estate, retail, and hospitality sectors.
➢ By 2023, healthcare industry is expected to reach US$ 132 billion. India’s digital
economy is estimated to reach US$ 1 trillion by 2025. By end of 2023, India’s IT
and business services sector is expected to reach US$ 14.3 billion with 8 per cent
growth.
➢ The implementation of the Goods and Services Tax (GST) has created a common
national market and reduced the overall tax burden on goods. It is expected to reduce
costs in the long run on account of availability of GST input credit, which will result
in the reduction in prices of services.

Table: Sector-wise contribution of GDP of India (2018-2019)

GVA in 2018-19 (Rupees in Crore)

Sector
Constant share Current share
prices (%) prices (%)

1 Agriculture Sector 1,842,873 14.39 % 2,692,433 15.87 %

1.1 Agriculture,forestry & fishing 1,842,873 14.39 % 2,692,433 15.87 %

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 GVA in 2018-19 (Rupees in Crore)
Sector
Constant share Current share
prices (%) prices (%)

2 Industry Sector 4,029,782 31.46 % 5,042,587 29.73 %

2.1 Mining & quarrying 385,135 3.01 % 457,301 2.70 %
2.2 Manufacturing 2,346,216 18.32 % 2,853,986 16.83 %
Electricity, gas, water supply &
2.3 287,109 2.24 % 452,683 2.67 %
other utility services
2.4 Construction 1,011,322 7.90 % 1,278,617 7.54 %
3 Services Sector 6,936,122 54.15 % 9,226,346 54.40 %
Trade, hotels, transport,
3.1 communication and services 2,467,622 19.27 % 3,157,709 18.62 %
related to broadcasting
3.2 Financial, real estate & prof servs 2,775,970 21.67 % 3,555,780 20.96 %
Public Administration, defence
3.3 1,692,530 13.21 % 2,512,857 14.82 %
and other services
GVA at basic prices 12,808,778 100.00 % 16,961,365 100.00 %
Source: Ministry of Statistics and Programme Implementation (2018-2019)
Table: Sector-wise contribution of GDP of India (2018-2019)

GVA in 2018-19 (Rupees in Crore)

Sector
Constant share Current share
prices (%) prices (%)

1.1 Agriculture,forestry & fishing 1,842,873 14.39 % 2,692,433 15.87 %

2.3 Construction 1,011,322 7.90 % 1,278,617 7.54 %
Electricity, gas, water supply &
2.2 287,109 2.24 % 452,683 2.67 %
other utility services
3.2 Financial, real estate & prof servs 2,775,970 21.67 % 3,555,780 20.96 %
2.1 Manufacturing 2,346,216 18.32 % 2,853,986 16.83 %
1.2 Mining & quarrying 385,135 3.01 % 457,301 2.70 %
1 Primary Sector 2,228,008 17.39 % 3,149,734 18.57 %
Public Administration, defence
3.3 1,692,530 13.21 % 2,512,857 14.82 %
and other services
2 Secondary Sector 3,644,647 28.45 % 4,585,286 27.03 %
3 Tertiary Sector 6,936,122 54.15 % 9,226,346 54.40 %
Trade, hotels, transport,
3.1 communication and services 2,467,622 19.27 % 3,157,709 18.62 %
related to broadcasting

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 GVA in 2018-19 (Rupees in Crore)
Sector
Constant share Current share
prices (%) prices (%)

GVA at basic prices 12,808,778 100.00 % 16,961,365 100.00 %

Source: Ministry of Statistics and Programme Implementation (2018-2019)

Services sector is the largest sector of India. Gross Value Added (GVA) at current prices for
Services sector is estimated at 92.26 lakh crore INR in 2018-19. Services sector accounts for 54.40%
of total India's GVA of 169.61 lakh crore Indian rupees. With GVA of Rs. 50.43 lakh crore, Industry
sector contributes 29.73%. While, Agriculture and allied sector shares 15.87%.

Composition of Service Sector in India

In India, the national income classification given by Central Statistical Organization is
followed. In the National Income Accounting in India, service sector includes the following:
Trade, hotels and restaurants:
a. Trade
b. Hotels and restaurants
Transport, storage and communication
a. Railways
b. Transport by other means
c. Storage
d. Communication
Financing, Insurance, Real Estate and Business Services
a. Banking and Insurance
b. Real Estate, Ownership of Dwellings and Business Services
Community, Social and Personal services
a. Public Administration and Defence (PA & D)
b. Other services

The Role of Services in an Economy

A service lies at the very centre of economic activity in any society.

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Source: Dorothy Riddle, Service-led Growth

This model of the economy shows the flow of activity among the three principal sectors of
the economy.
1. Extractive Sector (Mining and Farming)
2. Manufacturing
3. Services (Which is divided in to five sub-groups)

All activities eventually lead to the consumer.

1. Business Services: Consulting, Finance, Banking.
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 2. Trade Services: Retailing, Maintenance, Repairs etc.,
3. Infrastructure Service: Communication, Transportation etc.,
4. Social/Personal Services: Restaurants, Health Care etc.,
5. Public Administration: Education, Government etc.,

Infrastructure services, such as transportation and communication are the essential links
between all sectors of the economy, including the final consumer.

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Future Prospects of the Service Sector in India
The service sector in India has the highest employment elasticity among all sectors. Thus, it
has the potential for huge growth as well as the capability to deliver highly productive jobs - leading
to revenue generation. To address the challenge of job creation, the Skill India program aims to
achieve its target of skilling/ up - skilling 400 million people by 2022. It aims to do this mainly by
fostering private sector initiatives in skill development programs, and by providing them with the
necessary funding.
Similarly, the Make in India program - while attempting to bolster the manufacturing sector
- will cause a multiplier effect in adding to the portfolio of the Service Sector. In this context, the
Start-up India initiative is a key enabler for both the manufacturing as well as service industry in
India - by offering to support innovative start-ups.

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Services Strategy
Larger organizations consist of a number of businesses which are called strategic business
units which are effectively self contained, serving a particular market with a limited range of
services.
The Marketing Planning Process is depending on four important phase’s such as:
Phase – 1: Strategic Context
Phase – 2: Situation Review
Phase – 3: Marketing Strategy Formulation
Phase – 4: Resource Allocation and Monitoring

Fig: The Marketing Planning Process for Services Marketing

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 Fig: The Marketing Planning Process for Services Marketing

Strategic Context:
The 1st phase of marketing planning has two steps:

➢ Defining the Mission

➢ Identifying Corporate Objectives.
These are derived directly from the strategic planning process.
It is necessary to identify the strategic context of the marketing plan to ensure that specific
marketing objectives and strategies are directed towards the overall corporate goals of the company,
rather than possibly suboptimal goals of the marketing department.

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Strategic Planning for Services Marketing
Introduction
All companies and institutions plan their activities, implement and evaluate them. Planning
is the first step in the management process. It is a rational approach to accomplish an objective. It
provides an integrated and coordinated effort.
Intangible dominant products/services require some special consideration in terms of
planning and strategy formulation. Strategy is a major comprehensive plan of action. In service
enterprises, managers need to think creatively and the key to creative thinking lies in strategic
planning. Much of the service planning process in similar to product planning process which
includes selection and implementing a marketing plan, but with slight modification to adapt to the
unique features of services.
Strategic planning in which the central organization develops a detailed overall master plan
with specified targets for the subsidiaries. Planning is important function of management in which
plan for the future activities and operation of an organization.

Definition
According to Philip Kotlar
Strategic planning is the managerial Process of developing and maintaining a viable fit
between the organizational objectives and resources and its changing market opportunities.
The aim of strategic planning is to shape the company’s business and products so that they
combine to produce satisfactory products and growth.

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 According to him strategic planning must be carried out right from the corporate level-which
is to guide the whole enterprise into a profitable future to the product/service level which means
developing a marketing plan for achieving its objectives in the market.
The basic idea of corporate strategic planning is to provide a framework within which a
whole range of more detailed strategic plan for various functions can be developed.

Strategic Planning Process

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Strategic Planning Process
Strategic Planning involves:
➢ Defining the company’s mission or purpose also termed as service vision
➢ Set the Organization objectives based on the mission
➢ Specifically develop a strategy that will fit the organizational goal, resources and
marketing opportunities.
➢ At the highest level is the corporate strategy, which is the long-term plan for the
success of the enterprise.

Mission
The purpose of the mission statement is to give the various stakeholders of the service
business a clear sense of purpose and direction. The mission statement is an important device for
coordinating activities in a service organization.
It provides a framework to enable staff operating in divers’ parts of the organization to work
together in a coordinated manner towards the achievement of the overall objectives and philosophy
of the enterprise.
The development of an effective mission statement is especially important in services
because of the need for focus and differentiation in service sector businesses. Service operations,
organizations need to develop a clear statement of purpose or mission to ensure that the appropriate
attention is directed at the key elements of their strategy.
Mission statements of a written form are the subject of attention. Mission statements or
missions are including:
❖ Business definitions
❖ Statements of business Philosophy
❖ Belief Statements
❖ Vision Statements
❖ Statement of purpose and so on.
Service Mission Statements
Prof. David has identified nine components of mission statements.
1. Customers – who are they?
2. Products or services – what are the firm’s major products or services?
3. Location – where does the firm compete?
4. Technology – what is the firm’s basic Technology?
5. Concern for survival – what are the firm’s economic objectives?
6. Philosophy – what are the basic beliefs values, aspirations and philosophical
priorities of the firm?
7. Self-concept – what are the firm’s major strengths and competitive advantages?
8. Concern for public image – what are the firms public responsibilities and what image
is desired?
9. Concern for employees – what is the firm’s attitude towards its employees?

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The mission and vision of Amazon.com
The mission and vision of Amazon.com is: Our vision is to be earth's most customer-centric
company; to build a place where people can come to find and discover anything they might want to
buy online. Amazon's mission statement focuses on effective and high-quality service.
Amazon Vision Statement
Our vision is to be earth's most customer-centric company; to build a place where people
can come to find and discover anything they might want to buy online.
Amazon's mission statement
Focuses on effective and high-quality service.

Corporate Objectives
Once a mission statement has been developed corporate objectives need to be addressed.
The purpose of the corporate objectives is for the stakeholders to measure the success of the mission.
Peter Drucker has identified a number of key areas in which objectives need to be set.
1. Market Standing
Sales and market shares by product and market segment; Customer service levels; and
availability of services.
2. Innovation
New products and services required to achieve market objectives.
3. Productivity
Productivity of employees and capital.
4. Physical and Financial Resources
Buildings, equipment, processes and technology, capital; and raw materials and
components.
5. Profitability
To replace assets, for innovation an expansion; and to reward risk taking and attract new
capital.
6. Manager Performance and Development
7. Worker Performance and Attitude.
8. Public Responsibility.
Service companies need to consider in which specific areas objectives should be set for their
organization. For example: in banking, objectives might be set in the following areas:
Profits, Growth, Funds attracted, Market Share, Shareholder Value, Services Mix,
Productivity, Image, Operations, Diversification, Management development, Staff Levels,
Technology, Relationship Markets etc.,
The emphasis at this level is on corporate strategic objectives, hot more tactical ones that
relate to marketing or operations. Corporate objectives should be attainable but require the
organization to stretch itself. Service Companies approach the setting of objectives in different
ways.

For Example: Corporate Objectives of Apple Inc:

Apple Inc. is one of the most famous and well known multinational organizations which are
head quartered in America. This organization designs and develops various electronic applications
and extensively used software. The organization is famous for its iPods, laptops, computers, iPhones
and various other applications. Therefore, it is one of the leading organizations of America.
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The corporate objectives of Apple Inc. are based on its mission statement which is based on:
1. Creating Advanced and Innovative Services,
2. High Quality Products and Ensuring Integrity of Business Procedures.
3. The Corporate Objectives of Apple are based on Ensuring Compliance of the
Products and Services,
4. Maximizing Shareholder Wealth,
5. Profit Maximization,
6. Sales Maximization

Designing the Strategy

This involves two major decisions:
1. Analyze the Current Business Portpolio and decide which business should receive
more emphasis and resources.
2. Develop growth strategies by adding new products or business to the current
portfolio.
Many service organizations have different and diversified businesses.
For example: In the financial sector, banks have wider range of business activities like.
➢ Deposits, Savings, Loans, ATM Service
➢ Investments, Corporate Development
➢ Rural Banking, Retail Banking, Over drafts etc.,
As most markets change to some extent over a period of time, the services many not match
the customer’s needs, organization seek to manage their growth in a manner that maintains a
portfolio of activities.
Risk spreading is an important element of portfolio management. One commonly used
framework for analyzing business portfolio is the Boston Consulting Group (BCG):
➢ Market Share
➢ Growth Matrix
The frame work was originally developed as measure of bringing about a more rational basis
for allocating funds, focusing on business generation and funds allocation in response to the
challenges of a dynamic competitive environment

Fig: Boston Consulting Group (BCG) Matrix

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32
Analysis
In the Boston Matrix “relative market share is shown moving from high to low on the
Horizontal Axis”. While “market growth rate moves from high to low on the Vertical one”.
The matrix denotes four categories of products: Many service firms have made attempts to
apply this approach to their organization.
Star: Star is services with high market share and high market growth.
They are probably new products in the market that is fast growing they use as much
cash as they generate.
The Question Mark or Problem Child: This denotes a product that has a low
market share but high market growth. This could be a product that has not yet reached a dominant
position in the market.
The Cash Cow: It has a large market share but low market growth. Here there is a
reasonable stability with a lot of cash being generated but little being use.
The Dog: It has a low market share with a low market growth. It has no real future and
is drain on cash.

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GROWTH STRATEGIES
Another approach towards “Growth Strategies”
➢ Product / Service
➢ Market Expansion Grid

These are proposed by Ansoff

In this, there are four possible growth strategies that are identified in the matrix.
1. Market Penetration
2. Product Development
3. Market Development
4. Product Diversification
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 These four growth options are associated with different sets of problems and opportunities
for the organization. These are relate to the level of resources required to implement a particular
strategy and the level of risk associated with it.
The Four options of growth strategy are:

Fig: Product (or) Service / Market Grid

❖ Product or Service is shown moving from “Existing to new on the Horizontal axis”.
❖ While Market Expansion moves from Existing to new on the Vertical axis”.

Market Penetration
This strategy focuses on the existing products in the existing target market. This can be
done by reducing (reduction on a smaller price) the price or through aggressive marketing policies.

Market Development
In this strategy, the service firm seeks to find new group of customers for their existing
product range. This can be done by expanding its sales in new geographical regions or customer
segments.

Product Development

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 An alternative strategy is to sell the new products for the existing markets. This is done by
modifying the current service to suit the needs of the existing customer segments.

Product Diversification
In this, the organization expands by developing new products for new markets. Though
diversification is a risky venture, it helps the organization to reduce dependency on a narrow product
/ market area.
Fig: Marketing Strategies with Customer Service

Determining strategies for achieving marketing objectives through elements of marketing

mix.

Functional Strategies
The corporate strategies sets the fram work for the functional strategy such as
❖ Operations Strategy
❖ Marketing Strategy
❖ Financing Strategy
❖ Personnel / HRM Strategy
Each department play an important role in service strategy process or product strategy
planning process. The activities of all departments must be coordinated to accomplish the corporate
objectives. The functional strategies are long term plans that lay down, how these industrial areas
are to contribute to and support the organizations achievements of long term goals.

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Fig: Integrated view of Functional(Corporate) Strategy

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