I.Sci, D.C.A, D.C.P; B.Com, M.Com; I.C.W.A. P.G.D.B.M.(MBA) NAT Ph.D. Pursuing D.Lit. Professor An Author Coordinator

1. Dr.Nishikant Jha [coordinator] “Where there is a will there is a way” I.Sci, D.C.A, D.C.P; B.Com, M.Com; I.C.W.A. P.G.D.B.M.(MBA) NAT Ph.D. Pursuing D.Lit. Professor An Author Coordinator Ph.D.Guide 1

2. “An All-rounder”

4. Guidance Lecture on Service Sector Management T.Y.B.M.S. {5th Semester} • PRESENTATION BY: • Dr. Nishikant Jha

5. Introduction to Services Most organisations provide a service of some sort or other. For organisations such as Banking, Insurance, Hospitals, Tourism, Airlines, Infrastructure , Education, etc. service represents a major part of what they have to offer. They are known as service organisations. Others who are in manufacture of products service is of lesser importance albeit significant importance. There are particular problems in services industries namely – tangibility, inseparability, variability, and perishability. Put in most simple terms services are deeds, processes and performances. Services include all economic activities whose output is not a physical product or construction is generally consumed at the time it is produced and provides added value in forms that are essentially intangible concerns of its first purchases. It encompasses a wide range of industries. [Page No. 1]

6. Differences between

7. Understanding Services • Activities or benefits that can be offered and are essentially INTANGIBLE. • They do not result into any ownership of anything. • They are activities • Intangibles capable of providing satisfaction • They may be non economic and voluntary. • They provide valuable benefits. • They are independent to physical product. • Requires Customer PARTICIPATION

8. A Goods-Service Continuum / Tangibility Spectrum

9. MYTHS • Services sector thrives at the expense of other sectors. • Services sector is labour intensive. • Services industries are “Cottage and Low Paying Industries”. • People require products before service. • In service sector services are only offered by the government sector.

10. How Important is the Service Sector in Our Economy? • The size of the service sector is increasing in almost all economies around the world • Services make up the bulk of today’s economy and also account for most of the growth in new jobs • Even in emerging economies, service output is growing rapidly and often accounts for half or more of GDP [55% in 2007 fm 18% in 1950s] • Jobs range from high-paid professionals and technicians to minimum-wage positions • Service organizations can be any size – from huge global corporations to local small businesses [Page No. 13]

11. [Page No. 8] Changing Structure of Employment as Economic Development Evolves Share of Employment Agriculture Services Industry Time, per Capita Income Source: IMF, 2010

12. Internal Services • Service elements within an organization that facilitate creation of – or add value to – its final output • Includes: • Accounting and payroll administration • Recruitment and training • Legal services • Transportation • Catering and food services • Cleaning and landscaping • Increasingly, these services are being outsourced [Page No. 36]

13. Classification • It lays importance in the types of resources to be used & how to manage the process. • It emphasizes the analysis of nature of service operation.

14. Classification ….contd.…. A. End-user • Consumer: hairdressing, personal finance, packaged holidays. • Business to business: advertising agencies, printing, accountancy, consultancy. • Industrial: plant maintenance and repair, work-wear and hygiene, installation, project management. B. Service tangibility • Highly tangible:vending machines, telecommunications. • Service linked to tangible goods: domestic appliance repair, car service. • Highly intangible: psychotherapy, consultancy, legal services. C. Contact • High contact (People-based services): education, dental care, restaurants, medical services. • Low contact (Equipment- based services ):automatic car wash, launderette, vending machine, cinema.

15. Classification ….contd.…. D. Expertise • Professional: medical services, legal services, accountancy, tutoring. • Non-professional:baby sitting, care-taking, casual labor. E. Profit orientation • Not-for-profit: NGO’s, charities, public sector leisure facilities. • Commercial: banks, airlines, tour operators, hotel and catering services. F. Service Provided • Producer services (Intermediate markets) / Financial Services: Banking, insurance, leasing • Shipping and Distribution: Ocean, rail / trucking, air-freight, wholesaling, warehousing, distribution • Professional and Technical:Technical licensing and sales engineering design services, architectural design, construction management and contracting, other management services, legal services, accounting • Other Intermediate Services: Computer, data processing, communication services (including software), franchising, advertising, other (commercial real estate, business travel, security, postal services, contract maintenance, etc) • Consumer Services (Final Markets to Private Citizens): Retailing health care travel, recreation, entertainment education • Other social services, including Government Other personal services (restaurants, home repair, laundry, etc

16. Major Trends in Service Sector • Government Policies (e.g., regulations, trade agreements) • Social Changes (e.g., affluence, lack of time, desire for experiences) • Business Trends • Manufacturers offer service • Growth of chains and franchising • Pressures to improve productivity and quality • More strategic alliances • Marketing emphasis by nonprofits • Innovative hiring practices • Advances in IT (e.g., speed, digitization, wireless, Internet) • Internationalization (travel, transnational companies) [Page No. 8]

17. Defining the Essence of a Service • An act or performance offered by one party to another • An economic activity that does not result in ownership • A process that creates benefits by facilitating a desired change in: • customers themselves • physical possessions • intangible assets [Page No. 19]

18. Characteristics of services: • Intangibility • Perish-ability • Inseparability • Heterogeneity • Ownership • Simultaneity • Quality Measurement • Fluctuating Demand

19. Distinguishing Characteristics of Services • Customers do not obtain ownership of services • Intangible elements dominate value creation • Greater involvement of customers in production process • Other people may form part of product experience • Greater variability in operational inputs and outputs • Many services are difficult for customers to evaluate • Service products are ephemeral and cannot be inventoried • Time factor is more important--speed may be key • Delivery systems include electronic and physical channels [Page No. 19]

20. Operations Management Marketing Management Customers Human Resource Management Managing Services Requires Collaboration between Marketing, Operations, and HR Functions

21. Key Elements in Service Marketing The service marketing-mix involves analysing the 7 Ps of marketing involving, Product, Price, Place, Promotion, Physical Evidence, Process and People. [Page No. 53,57]

22. PRODUCT IN SERVICES A ‘product’ can be defined as an idea, a service, or a good that involves a mix of tangible and intangible elements, which aim to satisfy consumers. It is traded for money or any other trading unit which has some value attached to it. Why doesn’t a customer hesitate to pay a higher price for a McDonald’s burger when compared to a burger at a roadside bakery? Or why does a customer pay high fares and travel on British Airways when he can travel at cheaper rates on other airlines? [Page No. 60,63]

23. PRICING IN SERVICES The pricing of services is different from the pricing of goods in many ways. 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 health care as fees; and for share or stock services as brokerage and commission. Pricing of goods is determined by the market demand in most cases, unless regulated by the government. On the other hand, 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. [Page No. 66,70]

24. COMMUNICATION IN SERVICES Some service providers like financial auditors, tax consultants and doctors do not promote their services aggressively due to the rules laid down by the regulatory authorities. For example, chartered accountants, lawyers. doctors, etc., cannot advertise their services on an individual basis. Therefore, they have to rely on word-of-mouth publicity,\ handouts, press releases, etc., to promote their services. [Page No. 78,80]

25. DISTRIBUTION (PLACE) IN SERVICES ICICI Prudential Life Insurance has developed a multichannel distribution strategy to market its insurance products. This distribution strategy includes bancassurance (offering banking and insurance products at one place), direct marketing through individual agents and financial service consultants, and corporate agents. ICICI Prudential Life runs its operations at 23 locations and some of them have many branches. The company has won several awards for its innovative distribution strategies. In the year ended March 31, 2004, the company had issued over 4,30,000 policies, for a total assured sum of over Rs. 8,000 crore and a premium income in excess of Rs. 980 crore. The company has a network of about 30,000 advisors as well as 12 bancassurance tie-ups. Today, the company is the top private life insurer in the country. This example proves that the distribution strategy of a company plays a key role in determining its success. Place, the ‘fourth P’ of the marketing-mix, deals with the development of distribution strategies. The main aim of these strategies is to make the products and services available and accessible to customers whenever they want to make a purchase. As part of ‘place’, company needs to make decisions relating to the channels of distribution like its geographical coverage, location of the service outlets, inventory, and transportation. [Page No. 83,85]

26. PEOPLE IN SERVICES Like manufacturing organisations, service organisations are also trying to use technology to get their tasks done more effectively and efficiently. Tellers in banks are being replaced by ATMs, call centre operators in service centers are being replaced by computers and many such jobs are being automated. However, service organisations have realised that they cannot completely replace people with machines. They do need people because machines can act and respond only in the way they are programmed and therefore cannot deal with exceptional situations. [Page No. 93,97] People Strategies: Attracting the Best Talent Motivating Training Retaining Training Right Person at Right Time for Right Work with Right Cost & Right pace…….

27. PHYSICAL EVIDENCE IN SERVICES Services are intangible by nature. However, we rarely come across a service organisation that does not offer any tangibles to its customers. We cannot imagine a bank without a single chair to sit down on, a coffee shop with dowdy interiors or a star hotel without well-dressed service personnel. It is but natural for people to judge the quality of service at a service provider based on the look of the office. Well-furnished lawyer’s rooms, in a snazzy building, located at the city centre suggest that the lawyer is successful, efficient and offers quality service. A new client, in the absence of the lawyer having any reputation to go by, would prefer the services of this lawyer to one who has a dingy office in an out of the way place. These illustrations clearly establish the importance of tangibles or physical evidence in the services sector. [Page No. 102,103] Some of the major elements of physical evidence are:  Physical environment  Modes and content of communication  Price of the service  Appearance and conduct of service personnel,  Tangible elements accompanying service  Brand

28. PROCESS IN SERVICES Process is an element of the extended marketing-mix of services marketing. A process outlines the procedures and methods to be followed to produce and deliver a service. It also determines the extent of customer involvement and participation required in service creation and delivery. Therefore, process explains a series of activities, their sequence and the role to be played by the service provider, the intermediaries and the customer. It plays an important role in determining the quality of service design, production and delivery. A well-designed and well-executed process increases operational efficiency, offers convenience to customers, reduces the cost of offering services, and improves the efficiency of service delivery. Effectively, it helps in achieving the goal of customer satisfaction. [Page No. 111]

29. POSITIONING OF SERVICES After segmenting and selecting the target market, the next logical step in developing a market strategy is to design a differentiation and positioning strategy. Let us look at some examples that show the importance of these concepts. The Ritz Carlton is considered one of the best hotels around the world for ‘customer service’. Daewoo is well known for manufacturing ‘family cars’. McDonalds, is known for its ‘variety of products, speed and efficient customer service. Jet Airways in India has received many awards for being the best airline to serve the economy and business class travellers. All these companies have differentiated their products/services well enough for their customers to view them as distinct from their competitors, offers and have helped them occupy a unique place in their customers’ minds. [Page No. 118, 130] MARKET SEGMENTATION

30. BALANCING OF DEMAND AND CAPACITY IN SERVICES The demand for airline services can be high in two instances. One is during a period of economic growth when there is a lot of business activity in the country and the number of business travellers increases. The second instance is during a festive or holiday season when the number of leisure travellers increases. On the other hand, the demand for the airline services reduces when the economy is hit by recession as corporate enforce budget cuts in the area of travel. The demand also reduces when schools and colleges have exams or during the off-season. How does the airline manage its capacity to suit these fluctuations in demand? How should it optimize its services to get maximum benefits? [Page No. 137, 145, 148]

31. Perspectives on Service Quality Quality = excellence. Recognized only through experience Transcendental: Product-Based: Quality is precise and measurable User-Based: Quality lies in the eyes of the beholder Manufacturing-Based: Quality is conformance to the firm’s developed specifications Value-Based: Quality is a trade-off between price and value [Page No. 178]

32. Importance of Productivity and Quality for Service Marketers Productivity • Helps to keep costs down • lower prices to develop market, compete better • increase margins to permit larger marketing budgets • raise profits to invest in service innovation • May impact service experience (must avoid negatives) • May require customer involvement, cooperation • Quality - Gain competitive advantage, maintain loyalty - Increase value (may permit higher margins) - Improve profits [Page No. 179]

33. Credence Quality-9 C’s • Courtesy • Confidentiality • Credibility • Communication • Customer Knowledge • Contact • Competence • Concern • Consistency

34. Gap 1:Not knowing what Customers Expect CUSTOMER Customer needs and expectations 1. Knowledge Gap MANAGEMENT Management definition of these needs 2. Standards Gap Translation into design/delivery specs 3. Delivery Gap 4. I.C.Gap Execution of Advertising and design/delivery specs sales promises 5. Perceptions Gap 6. Interpretation Gap Customer perceptions Customer interpretation of communications of product execution 7. Service Gap Customer experience relative to expectations Gap 2: Not Selecting the Right Service Designs Standards Gap 3: Not Delivering to Service Standards Seven Service Quality Gaps Gap 4: Mismatch Between Promises and Performance [Page No. 189]

35. Prescriptions for Closing Service Quality Gaps • Knowledge: Learn what customers Expect--conduct research, dialogue, feedback • Standards: Specify SQ standards that reflect expectations • Delivery: Ensure service performance matches specs--consider roles of employees, equipment, customers • Internal communications: Ensure performance levels match marketing promises • Perceptions: Educate customers to see reality of service delivery • Interpretation: Pretest communications to make sure message is clear and unambiguous. [Page No. 204]

36. Measuring Service Productivity • Traditional measures of service output tend to ignore variations in quality or value of service • That is, they focus on outputs rather than outcomes, andstress efficiency but not effectiveness. • Firms that are more effective in consistently delivering outcomes desired by customers can command higher prices. Furthermore, loyal customers are more profitable. • Measures with customers as denominator include: • profitability by customer • capital employed per customer • shareholder equity per customer [Page No. 219]

37. Facilities, Equipment Frontstage Personnel Procedure Delayed check-in procedure Aircraft late to gate Gate agents cannot process fast enough Arrive late Oversized bags Mechanical Failures Late pushback Acceptance of late passengers Customers Late/unavailable airline crew Delayed Departures Late food service Late cabin cleaners Other Causes Poor announcement of departures Late fuel Weather Air traffic Late baggage Weight and balance sheet late Materials, Supplies Backstage Personnel Information Cause and Effect Chart for Airline Departure Delays

38. SERVICE RECOVERY Service recovery refers to the actions taken by an organisation in response to a service failure. Failures occur for all kinds of reasons – the service may be unavailable when promised, it may be delivered late or too slowly, the outcome may be incorrect or poorly executed, or employees may be rude or uncaring. All of these types of failures bring about negative feelings and responses from customers. Left unfixed, they can result in customers leaving, telling other customers about their negative experiences, and even challenging the organisation through consumer rights organisations or legal channels. [Page No. 224]

39. An Eight-step Model for Developing Consumer Complaints Management Initiatives Step One: Define Problem and Gather Information [Page No. 235] Step Two: Hold Preliminary Discussions with Major Stakeholders Step Three: Create a Working Group Step Four: Prepare Preliminary Draft and Explore Appropriate Structures Step Five: Consult With Stakeholders Step Six: Announce and Publicise the Initiative Step Seven: Implement the Initiative Step Eight: Monitor, Review and Improve the Initiative

40. SERVICE MANAGEMENT Service management, also called IT service management, is the discipline used in industries that provide services or a combination of goods and services. While widely used in the IT industry, specifically the ICT (Information and Communication Technology) sector, service management can be integrated into many other industries. Service management is usually used in conjunction with operations support systems. Systems that use service management can include order management, inventory management, activation, maintenance, performance diagnostics and several other types of support systems to make sure that these systems are running proficiently and error-free. Service management is progressing to the pinnacle as a competent business approach. To preserve development and customer loyalty in a cutthroat business environment, top businesses are now identifying the necessity to enhance service and service enabled competency.

41. THE SIX DIMENSIONS AND STYLES OF SERVICE LEADERSHIP

42. Operations-driven strategies Control costs, reduce waste Set productive capacity to match average demand Automate labor tasks Upgrade equipment and systems Train employees Leverage less-skilled employees through expert systems Customer-driven strategies Change timing of customer demand Involve customers more in production Ask customers to use third parties Operations-driven vs. Customer-driven Actions to Improve Service Productivity

43. BMS Examination Pattern The marks are divided into 2 parts 40 Marks Internal Examination 60 Marks External examination 20 M Class Test 20 M Projects, Presentations, Behavior, Attendance etc.

44. THANK YOU