UNIT 1 SERVICE INDUSTRY: CONCEPTS, CHARACTERISTICS AND ISSUES
1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 Objectives Introduction Services: Concepts and Characteristics Factors Fostering the Growth of Services Characteristics of Services Services and Their Classification Conceptualisation of the Service Product Services Mix Services in Tourism Let us sum up Clues to Answer
After reading this Unit you will be able to: § § § § understand the definition and scope of services, have an idea about the crucial position of services in economy, differentiate between marketing mix for product versus services, learn the application of issue related to services in tourism
The service sector has increased drastically in importance over the last couple of decades. It has increased to the extent that Bill Gates, CEO of Microsoft, in one of his interviews remarked that in coming years service sector would be the largest industry in the world. In a country like UK even today it accounts for nearly two-thirds of the economy by income and jobs. In USA, more than 75 million Americans are employed in service sector and as much as 7 per cent of US economy is service oriented. This percentage is expected to go up to 85% by 2010. This kind of apprehension has led a New York congressman to remark that America is becoming a nation of people who are serving each other hamburgers or taking in each other’s laundry. This pattern of economic development is not universally applicable to all countries. In many African and Asian countries agricultural sector is still the dominant one. In India, although the increasing presence of service sector can be felt but agriculture still continues to retain its stronghold on the economy. Though the manufacturing and service sectors are growing not only in terms of volume but also in sophistication and complexity, today more than 65-70% of most western economies are in service sector. This backdrop of the stage made Daniel Bell, in his book “ The Coming of Post-Industrial Society”, to write that, “if an industrial society is defined by the quantity of goods as marking a standard of living, the post-industrial society is defined by the quality of life as measured by the services desirable and possible for everyone”. This Unit familiarises you with the concepts and characteristics of services in general and tourism in particular. The Unit aims at addressing issues like classification of services, how the characteristics and requirements of each class differ as well as how can you apply service mix in relation to the demand patterns. Knowledge of all these aspects is essential for developing and designing tourism products.
1.2 SERVICES: CONCEPTS AND CHARACTERISATICS
The term service is rather general in concept and it includes a wide variety of services ranging from business and professional services, such as, advertising, marketing research, banking insurance, computer programming, legal and medical services, to services rendered by professionals but censured for reason other than business like leisure, recreation, entertainment and fulfilment of other psychological and emotional needs, such as, education, fine arts, etc.
Utilities Electricity Water Supply Law Enforcing, Civil, Administrative and Defence Services Police Army Air Force Navy Judiciary Civil Administration (sewage disposal, maintenance of roads, parks and public buildings) Table 1: List of Selected Services Insurance, Banking, Finance Banks Shar es and Stock Brokers Business, Professionals and Scientific Activities Advertising Marketing Research Consultancy Accounting Legal Medical Educational Research Maintenance and Repairs Leasing Computer Programming Employment Agencies Transport and Communication Railways (Passenger and Freight) Air Transport (Passenger and Freight) Post and Telegraph Telephone and Telecommunication Broadcasting (AIR) Telecasting (Doordarshan) Distributive Trades Wholesale Distribution Retail Distribution Dealers, Agents Miscellaneous Beauty Parlours Health Clubs Domestic Help Dry Cleaning Matrimonial Services Property Consultancy
Source: Adapted from Donald Cowell, “The Marketing of Services”, Heinemann, London
Leisure and Recreation Cinema Theatres Clubs, Gymnasium Restaurants, Hotels Video Game Partners Casinos, Self Improvement Courses
Faced with such a broad spectrum it is apparent that defining services narrowly as only relating to traditional services is clearly incorrect. Manufactured products tend to be highly tangible but services have become inseparable part of the overall product and they plays a major role in the buying process of any product. To Kotler “service is any activity or benefit that one party can offer to another that is essentially intangible and doesn’t result in the ownership of anything. Its production may or may not be tied to a physical product. Whereas W.J. Stanton has included major characteristics of services in his definition when he writes that “services are those separately identifiable, essentially intangible activities which provide want satisfaction and are not necessarily tied to the sale of a product or another service to produce a service, may or may not require the use of tangible goods. However, when such use is required there is no transfer of title to these tangible goods”. You should have understood by now that just as in the case of product marketing, in case of the service marketing also your starting point for understanding the marketing dynamics is the wantsatisfaction of customers. It is imperative to correctly dentify the particular want(s) which your i service is fulfilling, since this will provide the use for designing the most appropriate marketing strategy.
1.3 FACTORS FOSTERING THE GROWTH OF SERVICES
In the past manufacturing industries grew because they produced satisfy human’s physiological needs of food, shelter and clothing. Once these basic needs were met there was demand for improved satisfaction. The customer started believing that he/she deserves a better treatment from manufacturer for the money he/she spends on buying. This let to a proliferation of variation of same products with attached services as complimentary value to the money of customers. For example, you buy a TV set and one-year maintenance service is free. Table 2 presents the factors which fostered growth of service industries.
Table 2 Factor 1. 2. Increasing Affluence More Leisure Time Type of Service Required Interior decoration, Laundry care of household products, etc. Greater demand for recreation and entertainment facilities, travel resorts, adult education and self improvement courses Greater demand for crèches, baby sitting, household domestic help Greater demand for nursing homes and health care services Greater demand for skilled specialists and provide maintenance for complex products, such as, computers, cars, air conditioners, etc. Greater demand for specialist in income tax, labour laws, legal affairs, marriage counselling, employment services Greater demand for purchased or leased services, car rentals, travel, resort and time sharing rather than ownership basis The computer marked development of such services industries as programming, repair and time sharing
3. 4. 5. 6.
Higher Percentage of Women in Labour Force Greater Life Expectancy Greater Complexity of Products Increasing Complexity of Life
Greater Concern About Ecology and Resource Scarcity Increasing Number of New Products
Source: Schoell, K.F. and J.T. Ivy, “Marketing: Contemporary Concepts and Practices”, Allyn & Bacon, Baston, 1981
To simplify our u nderstanding about these reasons we can classify these factors in to four main groups:
a) Demographic changes : Risen life expectancy; and Structural shifts in communities. 7
Increased number of women in labour force; Improved quality of life; Improved and sophisticated consumer tastes due to international travel; Greater complexity of life; and Increased aspiration levels.
Globalisation; New Information Technology; and Increased specialisation within the economy.
Political and Legal Changes
Increased size of government; and Internationalism.
Many of these changes have knocked on effects. For instance, globalisation is producing concentration in many industries through mergers and acquisitions; Internationalisation has made increased and new demands for legal and other professional services; Increased specialisation within our economy has led to greater reliance on specialist service providers; Increased number of women in labour force has created the demand for babysitters, fast food outlets and other personal services. Hence, services have emerged with new dimensions.
1.4 CHARACTERISTICS OF SERVICES
Several authors have pointed out a number of unique characteristics that make services so different from products. But the most commonly characteristics ascribed to services are: • • • • • Intangibility; Inseparability; Heterogeneity; Perishability; and Ownership.
Any given service will display a different combination of each of five factors as is illustrated in Fig. I on Goods-Services Continuum.
Salt Soft Drinks
Automobiles Fast Food Outlets Cosmetics
Tangible dominant Airlines Advertising Agencies
Intangible dominant Consulting
Investment Teaching management
Figure I: Goods -Services Continuum
(Source: Shostack, G.L., “Breaking Free From Product Marketing”, Journal of Marketing, Vol. 41, No.2, American Marketing Association, 1977)
This suggests a continuum for each of five characteristics, e.g., a fast food service is high on intangibility, highly standardised, generally performed near to the customer and is perishable. On the
other hand, financial services are less tangible, highly varied, can often be performed away from the customer and are generally required immediately. Tourism being the largest component of service sector, its products share the same characteristics. It is important for you to understand at length these characteristics and their applications in tourism. Better understanding of these characteristics would enable you to design, operate and sell these services products effectively. 1) Intangibility When in tourism you buy a tour package you are basically buying a dream, a concept or an idea. You cannot touch it, feel it, or smell it. When you buy a package or any tourism product you can only develop an imaginary picture about what you are going to see at the destination, whereas when you buy a bathing soap you can see it, smell it, touch it, feel it and use to check its effectiveness in cleaning. In this product buying you can immediately check its benefits whereas in case of tourism product there is no fixed method to calculate what would be the level of satisfaction or value for money that a tourist will get in return. The continuum of Goods-Service discussed in Fig. I, however, suggest that most services in reality are a combination of products and services having both tangible and intangible aspects. For instance, when you sell a hotel room, hotel room is tangible since it’s location, physical amenities offered, etc. can be seen and felt by a guest but services attached with the room like room service, laundry, food and beverages, back office, etc. are intangible aspects of tourism services. Therefore, the intangible features of services are: a) a service cannot be touched; b) precise standardisation is not possible; c) there is no ownership transfers; d) a service cannot be patented; e) production and consumption are inseparable; f) there are no inventories of the service; g) middlemen roles are different; and h) consumer is part of production process so that delivery system must go to the market or customer must come to the delivery system. 2) Inseparability In case of a consumer product, say body talk, is produced/manufactured at Calcutta but is brought and sold at Delhi, whereas in most cases a service cannot be separated from the person or firm providing it. A service is provided by a person who possesses a particular skill (chef or an escort) by using equipment to handle a tangible product (dry cleaning) or by allowing access to or use of a physical infrastructure (hotel, train). To put it in other words, a plumber has to be physically present to provide the services, a guide has to go physically along with the group, a beautician has to be available to perform the massage. 3) Heterogeneity In tourism related services humans serve humans. The human element is very much involved in providing and rendering services and this makes standardisation a very difficult task to achieve. A restaurant chef who cooks best cuisines in best possible manner with full attention but every time same chef may behave differently while preparing same cuisine or while presenting it. The new bank clerk may not be as efficient as the previous one and you have to spend more time for the same activity. In hotels, airlines, restaurants, etc. there are standardised procedures to book a room, seat or a corner, respectively. To minimise human contact, Computerised Reservation System (CRS) is created but when you reach the hotel there will be a well-groomed a trained person at the reception who nd will handover the keys, his behaviour will be an important factor in your overall assessment of the
standard of services provided by the hotel. Thus, it is the people interacting with you who will make all the differences between a favourable and unfavourable perception of the hotel. 4) Perishability Products are produced in the factory today, stocked for the next two, three or four months and sold when an order is procured. However, services cannot be stored because they are perishable. An unoccupied air seat, a vacant hotel room, an unsold seat in cinema hall, or a car mechanic who has no cars to repair today is irreparable loss because all these are perishable services. Besides, a service not fully utilised represen ts a total loss or even a fluctuating demand. For instance, there is peak demand time for buses in the morning and evening or certain train routes are always more heavily booked than others. This fluctuating demand pattern aggravates the Perishability char acteristics of services. 5) Ownership When you buy a product, you become it’s owner – be it a pencil, book, shirt, refrigerator or a car. In case of a service you only pay for its use but you never own it. You book for yourself passage by air from Delhi to Bombay, you have paid only for the use of air seat but you don’t own it. By paying wages you can hire the services of a baby sitter for some stipulated time but cannot own it. To sum up, if we examine why service/product is purchased we find service is purchased because of the benefits it provides whereas products are bought because they provide certain tangible benefits and satisfaction. Therefore, the only difference between product and service is that in the latter, the intangible component is greater than in former. Thus, services have to be treated as special kind of products with special characteristics.
1.5 SERVICES AND THEIR CLASSIFICATION
A lot of attention has been devoted towards the development of a classification system for services. Such a classification system helps service managers to cross their industry boundaries and gain experience from other service industries which share common problems and have similar characteristics. At the simplest level we can use two dimensions for classification – one the tangibility of services act and secondly, to whom the services are directed at. Table 3 will help you understand the classification scheme.
Table 3 Services Directed At Nature of the Service Act People Tangible Action Services directed at people’s bodies Health care, Saloons, Restaurants, Transportation Intangible Action Services directed at people’s minds Education, Broadcasting Information, Museum Possession Directed at goods, physical possession Transportation, Laundry/Dry Cleaning, Lawn Care Services directed at intangible assets Banking, Legal Services, Insurance, Accounting
Table 3 makes us understand the nature of service act. Whereas other classification schemes allow us to understand relationship between service organisation and it’s customers, the nature of services demand and the attributes of a service product. For instance, in the case of services and customer relationship scheme both institutional and individual customers may enter in to a continuing relationship with service providers and opt for receiving services continuously. Therefore, it can also be classified on the basis of whether nature of relationship is continuous o intermittent. It can be r illustrated as in Table 4.
Table 4 Nature of Delivery Continuous Membership Education Insurance Banking Intermittent Theatre Seat Subscription Non-Membership Police Protecting Public Highway T.V. Transmission Car Rental Pay Telephones
Whereas on the basis of service delivery mode Loveluck has used two service delivery modes, viz., single and multiple site modes as is given in Table 5.
Table 5: Service Delivery Mode Availability of Outlets Nature of interaction between customer and organisation Customer goes to service organiser Service organiser comes to customer Customer and organiser transact Single Site Theatre Lawn Care Pest Control Credit Cards Local T.V. Stations Multiple Site Bus Service Fast Food Chain Mart Delivery Emergency Auto Repairs Telephone Company Broadcasting
In tourism we can also apply another important basis for classifying services, i.e., extent of contact that needs to be maintained between the user and provider. The market implication in this case being the necessity of physical presence of the provider as well as need to manage desired quality of personnel in case of high contact services. On this basis all services can be classified on high contact or low contact services depending upon the time a user needs to spend with the services organisation/provider in order to utilise the services. For example, high-level contact services are hospitality, tourism education, theatre performance and low contact services include dry cleaning, telecommunic ation and broadcasting.
1.6 CONCEPTUALISATION OF THE SERVICE PRODUCT
By now you know that success of any service depends upon need-satisfaction which is nothing but optimism value for money. On the basis of this very base conceptualisation of service product can be illustrated as:
Level 1 : Consumer Benefit Concept Concerned with what benefits do customer seek Translated into Level 2 : Service Concept Concerned with what general benefits will the service offer Translated into Level 3 : Service Offer Concerned with greater detailed shaping of service concept decision on: Service elements (tangible and intangible) Service forms (in what way and how) Service levels (quality and quantity) Translated into Level 4 : Service Delivery System Creation and delivery of service using guidelines built in to the service offer concerned with people processes, facilities etc. 11
In this illustration the underlining concepts that require to be understood at length are: a) Customer Benefit Concept: For obvious reasons the service product that you offer in the market place must have its origin in the benefits customers seek. But the problem comes where customers themselves are not exactly aware of them, be it single or a combination of them. Moreover, over a period of time benefits sought may also change. This change may be due to unsatisfactory experience or changes in expectations. All these issues make marketing of services like travel and hospitality a very complex activity. b) Service Concept: Once the benefits sought by customer are identified, service concept is visualised defining specific benefits to be delivered by the service. For instance, a hotel may be offering a variety of rooms both in terms of category and location but there can be specific choice paths for satisfying the dodging objective, such as, safety, comfort, recreation, etc. In other words, defining service concept helps to answer the fundamental question “what business are we in?” c) Service Offer: Having defined the nature of business we ar e operating in, it is necessary to give this concept a shape or a form. For example, for a performing art centre service concept is to provide entertainment. In this case service offer should concern with specific elements that will be used to provide entertainment, e.g., drama, music, poetry, recitation, dance, etc. In the category of musical concert the choice may be vocal or instrumental, or within vocal whether light or classical, Hindustani or Carnatic or even western. All these represent intangible it ems of service offer whereas the physical infrastructure, i.e., seating capacity, comfortable seats, quality and aesthetics, provision of effective air conditioning, snack bar and toilets are tangible items. The quality of tangible items can be controlled but same may not be true for intangible items since the performance of actors, singers or musicians cannot be controlled. d) Service Forms: Answering the question that in what form should the service be made available to the customers is yet another important conceptual item of the service products or their decisionmaking. Extending further the example of centre for performing arts decision will have to be taken as regards: should all the shows of the centre be available in a package deal against a yearly membership fees or should there be on a daily ticket with the consumer having the freedom to watch any one or more performances being staged on that particular day or should each performance has a separate entrance ticket wherein commanding a premium from well known performer is also possible. e) Service Delivery System/s: This reflects how and who will deliver the service. For instance, in a Restaurant, waiter/waitress take the order and pass on the KOT to kitchen, then kitchen prepares the ordered food which is served in the desired manner by the waiter. The two main elements of delivery system are people and physical evidences Waiters/waitresses, chefs, etc. are people whereas the building, interiors, furnitures, fittings, fixtures, and crockery, etc. a the physical re evidences.
1.7 SERVICES MIX
As a practising manager for services, you may be marketing not just one service but also a range of services. In this context it would be a difficult task for you to decide on the length and width of the range of services, and the manner in which they complement and support each other. In tourism, for example, if you are providing travel agency services to tourist you would also be providing insurance, car rental related services, and foreign currency related services and many more to provide complete satisfaction to guests. Besides the range of services, another important factor is related with application of marketing mix for service mix. 1) Price: In services as already discussed benefits/value derived by the customer determines the satisfaction level and this ultimately will decide upon what price customer would pay for a service. In case of products where ownership exchanges hands against a committed mode of payment, whereas in services where there is no exchange of ownership and where shelf life of product is limited, i.e., perishable, price becomes the obvious concern of customer. For instance,
hotels and airlines offering lower rates in off-season is a good example of how pricing strategy can be used to offset the perishable characteristics of services. To diffuse the problem related with intangibility and non-standardisation of services, etc. the prices may be settled through negotiation between buyers and sellers. Another important characteristic of prici g in services is that higher the personalisation of n services greater would be the freedom to fix the price at any level. It is often observed in services that the prices may be fixed according to customer’s affordability. In such cases it may also be used as indicators of quality. Another common characteristics of pricing for services are regulation. They may be controlled by trade associations, like IATA, which regulate the commission rate being given by airlines to their GSA and PSA’s. In all such cases, the producer has no freedom to determine his own price. The prices of many tourism related services are also affected by factors like foreign exchange rates, bank charges, electricity and water rates, fare for rail and air transport, etc., which are controlled by government. 2) Pricing Strategy: Two most common methods, which a service organisation may use to determine prices are: • • cost based pricing, and market oriented pricing.
In the former, price may be regulated by government or industry association o the basis of the n cost incurred by the most efficient unit. Whereas the later may either be a result of competition or customer -oriented. In this case price may be fixed at the level which the competitor is charging or fixed lower to increase market share, i.e., it is fixed according to customer’s ability to pay. 3) Promotion: While promoting services it must be kept in mind that customer relies more on subjective impression rather than on concrete evidences. This is primarily because of intangible nature of services but it is also due to the fact that customer is likely to judge the quality of service on the basis of performance rather than the actual service. To add to it for service provider it is difficult to sample it before paying for it and hence the customer cannot evaluate its value and quality. Thus, as a marketing manager of services you must design your promotion strategy in such a manner so as to overcome all these constraints. However, use of information technology has come handy for the producer to demonstrate certain quality levels in services. This they do with the help of CD-ROMs, films, etc. Four methods are broadly used for promoting services, viz., advertising, personal selling, publicity and sales promotion. We shall see application of each of these in relation to promotion of services. 4) Advertising: Advertising can be defined, as is any kind of paid, non-personal method of promoting by an identified organisation or individual. Certain services such as entertainment, passenger and freight transport, hotel, tourism and travel and insurance have been advertising aggressively in newspaper, magazines, radio channels, T.V. channels to promote greater usage and attract more customer’s. On the other hand services providers like doctors, lawyers and chartered accountants rarely use this medium. They rely more on word of mouth for attracting new customers. Though it may also be true for travel and tourism related services, as Pt. Nehru said, “Welcome a stranger send back a friend”. This friend after going back to his or her country will work as ambassador for your services. But the task of pulling out this stranger for the first time from his or her house can be accomplished only by using the various media of promotion. Therefore, as a marketing manager of services you must follow following guidelines: a) use simple and clear messages; b) emphasise the benefits of services; c) promise only that which can be delivered and do not exaggerate claims; d) use endorsements of actual consumers in advertis ing;
e) create a positive image for the company by describing the company’s services, activities and its areas of expertise; f) build a strong sense of identification with the customer by turning his needs values and attitudes; g) finally, create a positive background for the sales people to sell the services by providing all relevant information about the company. Advertising has proved to be successful tool of promotion for leading tourist destinations in both developed and under-developed regions. For instance, when Singapore Tourism Promotion Board launched its first promotion campaign it said “countries offer gardens in them, we offer a country in a garden”. Clearly indicating that when you are in Singapore you are assured of cleanliness, hygenity, beautiful landscapes and natural attractions. They further extended their promotion campaign by saying “Destinations offers discounts on shopping, we offer discounts on discounts”, i.e., projecting Singapore as a shopper’s paradise. In India, the Department of Tourism has come out with the slogan “Incredible India”. 5) Personal Selling: is difficult to be used in services since in certain types of services, services cannot be separated from performer. However, here the performer does the personal selling for his or her company. The heterogeneous nature of services makes it difficult to sell. In this situation, it becomes imperative to use an actual professional rather than a salesman. This makes personal selling a costly affair. Only one method to make it cost effective is to associate it with a related product or service. For instance, management consultant may associate with a bank so that the bank recommends his/her name as a consultant to any entrepreneur coming for a loan. A chain of hotels may team up with an airline to offer a concessional package tour or vice versa as is done by Indian Airlines. Indian Airlines has entered in to Memorandum of Understanding (MoU) with Rajasthan State Tourism Development Corporation and with Goa State Tourism Development Corporation for providing concessional accommodation to the travellers of Indian Airlines on producing their boarding passes. 6) Publicity: is unpaid for exposure which is derived by getting coverage as a news or editorial team. To get publicity, your services are to be newsworthy or must be unique. If so, you can and shall hold a press conference in which you associate your services with some issues of greater social relevance. In such situation the only precaution to be adopted is in the right choice of newspaper, magazine or journal for publicity. For instance, when a hotel introduces a new restaurant to complete the product line, publicity of this event shall get coverage in all leading travel and hospitality related newsletters, magazines or journals. 7) Sales Promotion: As services are varied and various in number, sales promotion with different degree of emphasis may be used by different sectors of the trade. For instance, an airline may offer free return ticket to the companion under frequent flyer programme; a hotel may offer 3rd night free, i.e., stay with them on Friday and Saturday, Sunday comes free; a doctor may charge his patient lesser amount as fees on subsequent visits to encourage the patients’ loyalty; a car mechanic may offer a guarantee for repairs undertaken upto three months. All these sales promotion techniques are effective enough to convince us that they can be used to offset the perishable characteristics of the services. Family discounts can be offered, e.g., during off-season two children under the age of 12 can be allowed free of charge by hotels; or a chartered accountant may agree to offer his/her services free for the first 2 visits to allow the customer to evaluate his services. In other words sales promotion techniques intend to reduce the risk associated with the purchase. 8) Distribution: Unlike products which move from manufacturing units to warehouses and from there, to vendors and ultimately to customers/consumer, the services due to their characteristics like inseparability (doctors, teachers, consultants, mechanics, etc.) and fixed location (hotels, restaurants, hospitals, universities, etc.) necessitates the consumers to go to the service location. Therefore, before deciding upon a distribution strategy, we must answer the following questions related to the location of services:
a) How important is the location of service to the consumers? Will an inconvenient location hamper the demand? In case of fast food outlets, hotels, travel agents, airlines offices the answer would be “yes”, however, in cases of doctors, and beauty parlours, where the customer’s involvement with the provider of the services is very high and decision is made on the basis of reputation, competence and past experience. People travel to other cities for consulting doctors. b) How important can complementary services be to the location decision? Can the clientele be increased by locating services where complementary products or services already exist? Garages and mechanics shops located next to petrol stations are examples of complementary location decision and same can be said of a taxi stand and near a hotel. Another important criteria in distribution strategy is related to whether to sell directly to customer or through intermediaries. This has greater significance in the area of travel, hospitality and transport, property and life insurance while one may operate only through middlemen. In tourism related services, intermediaries like travel agents, tour operators, consolidators, wholesalers, general sales agents (airlines), passenger sales agents (airlines), booking agents (hotels) not only play important role in fostering the demand for travel but also remove the fear of unknown from the mind of customers by providing proper counselling and designing package tours of their liking. And for this they get commissions. Third decision variable in the distribution strategy is how to provide the services to a maximum number of customers in the most cost-effective manner. Franchise is one of the innovation or trend in hospitality sector. For example, any traveller coming from U.S. is assured of a high standard of services which he/she gets in Sheraton back home, if property here is a franchise of Sheraton (U.S.). It is difficult for Sheraton group of hotels to open up so many hotels across the world so they charge lumpsum amount as royalty from contracting hotel against this franchise agreement. This can be calculated as a percentage of per room sales or a percentage of gross sales of the hotels. Wherever franchise doesn’t work, referral system of distribution is used as an integration method. In this kind of distribution strategy out of a common reason many properties, located across the geographical boundaries become the member of a referral group like “Best Western Group”. The benefit comes in the form of international publicity against a minimum annual fee. Airlines not only appoint their General Sales Agents (normally one in each state) but also encourage travel agents to stock and sell their tickets against a pre-determined commission rates. Today even hotels have started networking with agents for group blockages of rooms during season. In service industries franchise is also used by restaurants (TGIF, KFC), car rentals (AVIS, Hertz, Budgets), fast food outl ts (Nirulas, Wimpy’s, McDonalds, Pizza Hut), beauty parlours (Shahnaz e Hussain, Romeo), packers and movers, pest control, etc. To complete the distribution gap the recent times have also witnessed the growth of an integrated service system. For example, hotels may offer local tours to their guests. India Tourism Development Corporation (ITDC), Taj Tours and Travels (Taj Group of Hotels) are some examples in this regard. Travel agencies have introduced vertical integration of distribution of services which means they offer package tours in which they take care of all formalities, such as, visa, foreign exchange, reservations, local travel, health or any other documentation required for overseas travel. All these trends highlight the importance of using innovative methods to overcome the inherent characteristics of service products which make their distribution a complex affair. 9) People: In services the most vital component is believed to be people. You must remember that all services are people oriented, wherein the people serve people. In tourism and hospitality services particularly, the behaviour and attitude of personnel providing the services bears an important influence on the customer’s overall perception, i.e., the service gap which has tendency to widen if involved human element is minimised. For instance, if as a customer you are dialling the office of an airline and if your call is not attended immediately you would start perceiving that if this is the sample what will be the service on board and you immediately drop the idea of
travelling by this airline. This clearly underlines the importance of human factor in service industry. Another reason which surfaces this importance is heterogeneous nature of product which clearly conveys the role of human-product interface in providing desired satisfaction. Human involvement in tourism and hospitality services is both in the front and behind the scene, i.e., as a manager of a restaurant you not only devote time or training for people who come in direct contact with their customer but also for those who remain behind the scene, i.e., works, telephone operators, etc. Therefore, it becomes important to reduce the gap between service expectation and satisfaction. To achieve this as a marketing manager your task is to improve the quality and performance of your service personnel. 10) Physical Evidence: As a service provider you by now know that due to their peculiar characteristics physical evidence assist in marketing these services successfully. For instance, cleanliness in doctor’s clinic, interior and exterior of a restaurant, comfort of seating arrangement in a cinema hall, adequate facility for personal needs at the airport, all attract customers. Physical evidences can be categorised as: a) peripheral evidence; and b) essential evidence. Peripheral evidence can be seen as a part of actual service like an airline ticket jacket or a passport holder receipt for a confirmed reservation, etc. which itself are of no value. These are seen in present competitive e nvironment as “adds on” to the value of essential evidences. In tourism services both kinds play vital role in providing total satisfaction and total value to the customers. Since ownership doesn’t change hands in tourism services, what remains as a memory with the customer is peripheral evidence. 11) Process: In any service organisation process is the system by which you receive delivery of service. For example, in a fast food outlet you have to first collect your coupon against cash/credit then you render this coupon to kitchen people, when your coupon number appears on the electronic board, you go and pick up your order. This can be seen as a process of delivery. On the other hand, a customer may need a combination of services using different sequences. For instance, in a hospital some patients only need consultation in out patient department, some others need consultation as well as medication or x -ray, some need hospitalisation for surgery or for investigation. An academic institution may offer courses for full time students as well as for working people through distance learning or part time. All these categories of consumers require a different combination of services.
1.8 SERVICES IN TOURISM
Tourism being a people oriented industry requires persons serving other persons. It has proved to be important element of this industry for last several decades. Ever since market oriented approach has come in to existence tourism services are facing severe challenges not only in terms of quality but also in terms of diversity. For instance, in the past people used to travel for a specific reason, i.e., trade or religion. Hence, their classification procedure was simple and their requirements could easily be assessed. But today motivation for travel has become so diverse that not only there classification has become complex but it has also affected the product designing process. In subsequent Units you will study about technicalities involved in designing of tourism products. You should know that the peculiar characteristics of tourism product related services are that it is highly sensitive to internal as well as external factors. In our recent past you must have noticed that the post-December 13, 2001 period witnessed decline in tourist arrivals due to advisories issued to international tourists by governments regarding unsafe political conditions in the country. This happened once again after terrorist attack on pilgrims at Akshardham temple in Gandhinagar in Gujarat. These are sufficient reasons to say that in comparison to other services tourism services are more vulnerable to sensitive issues. Thus, while designing tourism products or their related services you must bear in mind all these issues and considerations.
Check Your Progress 1) How can you character ise services? ………………………………………………………………………………………………………. ………………………………………………………………………………………………………. ………………………………………………………………………………………………………. 2) Discuss factors which have resulted in the growth of services? ………………………………………………………………………………………………………. ………………………………………………………………………………………………………. ………………………………………………………………………………………………………. 3) Evaluate the significance of services mix for tourism product services? ………………………………………………………………………………………………………. ………………………………………………………………………………………………………. ……………………………………………………………………………………………………….
1.9 LET US SUM UP
Services can be distinguished from products on the basis of their characteristics of intangibility, inseperatability, heterogeneity, lack of ownership and perishability. These are peculiar characteristics which pos e a challenge to the manager who has to market these services while applying market mix in appropriate proportions. To be a successful service provider you have to lay great stress on the last three elements of marketing strategy and combine them with the four to achieve a harmonious blend which fulfils the customers want satisfaction.
1.10 CLUES TO ANSWERS
Check Your Progress 1) Refer Sec. 1.2. 2) Refer Sec. 1.3. 3) Refer Sec. 1.7.