Lecture Topic 1 : The Service Sector
Reading : Chapter 1, Services Marketing : People, Technology, Strategy by Kotler & Wirtz, 7th Edition.
The Service Sector- some facts :
• In the West, business conditions generally remain difficult for service sector firms with falling prices hitting profitability.
- The service sector typically accounts for between 66% and 75% of GDP in most of the more highly developed economies. (Central Intelligence Agency, 2011)
- The service sector is the strongest growth area for marketing.
• The majority of workers are employed in the service sector
(International Labour Organisation, 2011)
• Most new jobs are generated by services
– Fastest growth expected in knowledge-based industries. – Significant training and educational qualifications required, but employees will be more highly compensated. – Service jobs will continue to be lost to lower-cost countries.
• Service earnings from abroad (‘invisibles’) are increasingly making a significant contribution to international transactions.
- Some service industries have a long history of international operations, e.g. US hotel and airline companies began expanding into Europe and the Far East after WW2.
The service sector is large and varied :
- It includes non-profit organisations such as colleges, charities and healthcare providers. - The government is a major provider of services, e.g. health, education, transportation, employment. - Some service firms are very large (e.g. Deutsche Bank employing over 100,000 employees in over 70 countries) and other service firms are very small employing only a handful of people, e.g. beauty salons, restaurants.
• The growth in services has paralleled a decline in manufacturing
The increase in demand for consumer and business services over the past 10-15 years in particular has been attributed to a number of factors :
1. ‘Cash rich and time poor’ consumers – contracting out domestic activities including cooking, cleaning, gardening, laundry, dog-walking; using internet shopping (e.g. Tesco, Superquinn) and internet banking (e.g. Rabodirect.ie).
2. Rising ownership of sophisticated technologies in the home – need for specialist services to install and service them, e.g. satellite television, energy management systems, home computers.
3. An ageing population in the US and Western Europe - increased demand for healthcare services, adventure holidays (e.g. Saga adventure holidays for the over 50s).
4. Increased desire for buying experiences vs. things provides many opportunities for service marketers, e.g. resort hotels adding spas, Virgin Galactic and space travel.
5. Immigration into Ireland provides many opportunities for service marketers, e.g. immigration consultants, ethnic restaurants.
Business services include repairs and maintenance, consulting and professional advice, installation, equipment leasing, temporary office personnel, marketing research, advertising and caretaking services.
1. International expansion– need for the expertise/knowledge of market research agencies, marketing consultants, financial services and legal advisers.
2. Marketing emphasis by not-for-profit organisations, e.g. universities, charities. Need for the expertise/knowledge of market research agencies, etc.
3. Pressure to reduce fixed costs – many firms now buying in services rather than performing them in-house, e.g. marketing research, IT support.
4. Focus on core competencies – many firms now contracting out non-core activities, e.g. warehousing and transportation, car fleet management.
The nature of service businesses - and how they are managed- is...
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