1. Marketing Of Services-1
Chapter No.1
Service Economy

2. Chapter
Introduction to Services 1
 What is service economy?
 Why services marketing?
 Reasons for growth of service
economy:
 Characteristics of Services
Compared to Goods:

3. Service Economy
“In a service economy a large
proportion of the working population
is employed not in agriculture and
manufacturing but in service jobs. In
service economies too a large
proportion of output is provided by
the service sector.”

4. Historical Background of
service economy:
Till second world war most of the developed
economies
(Like UK,USA, Australia, Germany)
were considered as the service oriented
economies.

5. What Economists and Marketers Say about
Service Economy……
Fuchs Wrote in 1968: The United States has become the
world’s first Service Economy during the period followed by
World War II, first nation in which half of the population is
involved in intangible services other than food automobiles
,houses ,cloth etc
Smith narrated in 1972:To measure and interpret service
output we should identify weaknesses in the statistical
treatment of services.
Heilbroner: The growth of services increases the possibility
of Govt interference in the market mechanism towards a
planned economic system on order to maintain essential
services.

6. Factors Influencing Service
Economy (Specifically UK)
 Services And Employment
 Services And Output
 Services And Consumption
 Services And balance of payments

7. 1.Services And Employment :
Economic Activities are divided into three classes:
 Primary:
(Agriculture, forestry fishing)
 Secondary:
(Manufacturing & Construction Industries)
 Tertiary:
(Services & Distributive Trades)

8. 2.Services And Output:
Service output are measured on the basis
of Service Quality and Service quantity
Unreliability is the factor which involves
increased difficulty level of measuring
the actual output of services

9. 3.Services and consumption
 Changing life patterns
 Moving to hold convenience life.
 Devices with extra services
 As consumption level of people for
products increase it will provoke the
people to go for effective use of services .

10. 4.Services and Balance of Payments
Funds
Currency rate
Regulation of economic
activities……

11. Reasons for growth of service economy
 The lag in growth in labor productivity in
services.
 Growth in intermediate demand from
firms.
 Growth in final demand from consumers

12. A…The lag in growth in labor
productivity in services.
 A greater decline in hours worked per MAN IN
SERVICE than in INDUSRTY.
 A more rapid increase in the quality of labour in
industry than in service.
 A difference in the physical capital per worker
available in industry compared with service.
 More rapid technological change in industry
than in service ,that industry benefited more
from scale economies

13. B…Growth in intermediate demand
from Firms:
Intermediate demand from firms
means creating or filling the need of
inputs provided to manufacturing and
other sectors of economy. Depending
on intermediate demand firms are
divided into three categories:

14. CONTD…..
 Specialists Firms:
Set up to provide services previously carried out by
existing firms.
e.g: Engineering services, personnel services.
 Alternatively Specialists Firms:
Set up to provide new services. e.g :data processing.
 Business Buyers:
They use services like :
accounting,construction,banking,insurance,legal,resear
ch,advertising,publicrelations,training,shipping,cons
ultancy services.

15. Analysis:
Companies and other organizations rely on
specialist services as it is the need of the
day to take hold on technological and
competitive pressure with lack of available
resources organizations encourage to use
outside services other than internally based
services.

16. C…Growth in Final demand from
Consumers:
 As societies get wealthier people generate final demands to
ordinary and l uxorious services.
 According to Law of Economies:
“As societies get wealthier and as the marginal utility derived
from additional increments of goods decline then people turn
to services expenditures.”
 It tells us about the relationship between income &spending
patterns on goods & services.
(travel,health,recreation,education,with changing lifestyles.

17. ???????????????
We will discuss
post industrial
society as it is
based on services:

18. Transformation of Industrial to Post
Industrial Society:
 First Stage:
Industry develops by expansion of transportation and of
public utilities with increasing use of energy with non
manufacturing blue collar forces.
 Second Stage:
It involves mass consumption of goods and services with
increasing population and changing trends to whole
sale and retail in term of finance, real estate and
insurance.

19. CONTD…….
Third Stage:
A German Statistician Christian Engel said:
“The proportion of money devoted to food at home
begins to drop and the marginal increments are used
first for durables and then for luxury and
recreation.”
Personal services begin to grow as
restaurants,hotels,autoservices,travel entertainment
,sports need for technical accessories etc.

20. Contributions of Service Industries to
U.S. Gross Domestic Product

21. Examples of Service Industries
 Health Care
 hospital, medical practice, dentistry, eye care
 Professional Services
 accounting, legal, architectural
 Financial Services
 banking, investment advising, insurance
 Hospitality
 restaurant, hotel/motel
 Catering, Entertainment & recreational
 Travel
 airline, travel agency, theme park
 Others
 hair styling, pest control, plumbing, lawn maintenance, counseling
services, health club, interior design, Communication

22. Why study Services Marketing?
 Service-based economies
 Service as a business imperative in manufacturing and IT
 Deregulated industries and professional service needs
 Service equals profits
 Services marketing is different

23. Figure 1.2
Tangibility Spectrum
Salt
 Soft Drinks
 Detergents
 Automobiles
 Cosmetics
 Fast-food
Outlets
 Intangible
Dominant
Tangible

Dominant Fast-food
Outlets 
Advertising
Agencies

Airlines 
Investment
Management

Consulting
Teaching

24. Challenges for Services
 Defining and improving quality
 Designing and testing new services
 Communicating and maintaining a consistent image
 Accommodating fluctuating demand
 Motivating and sustaining employee commitment
 Coordinating marketing, operations, and human resource
efforts
 Setting prices
 Finding a balance between standardization versus
personalization
 Ensuring the delivery of consistent quality

25. Impact of Service Economy on
Marketing:
 Marketers trend to make investments on
use of services.
 Market search requires area and economy
wise marketing
 Which economy is more rich in which
services
 To explore new services for changing
patterns of economy.

26. ASSIGNMENT………(Marks /10)
TASK:
 Select ONE country.
 Analyze its SERVICE CONTRIBUTION
PERCENTAGE in its GDP.
 Make a PIE CHART of the country’s service
contribution in different sectors of its economy.
 Conclude which service sector has the
highest contribution in GDP of the selected
country.

27. HOW TO SUBMIT Assignment……
 Written Report of not more than 3 pages
 Presentation to be made in MS
PowerPoint.
 Two students should be in one group.
 Report = 5 marks
 Presentation = 5 marks.