5 Major service sectors and career opportunities

Dr. Puja Waalia Mann

1.0 Introduction

Service sector is the “soft” part of the economy, i.e. activities where people offer their knowledge and time to enhance their productivity, performance, potential, and sustainability, which is termed as affective labor. The elementary characteristic of this sector is that they produce services instead of end products. Services (also known as “intangible goods”) include attention, advice, access, experience, and discussion.

Services might includes the transportation, distribution and sale of goods from producer to a consumer, such as in pest control or entertainment. The goods may be transformed in the process of providing the service, as happens in the restaurant industry. However, the emphasis is on service provider interacting with people and serving the customer rather than transforming physical goods.

The most important growth in this sector also implicates the transfer of funds from the governmental to the contractual profit, non-profit and hybrid sectors of the economy.For the last 100 years, there has been a considerable shift from the primary and secondary sectors to the tertiary sector in industrialised countries. This shift is called teritarisation. The tertiary sector is now the largest sector of the economy in the Western world, and is also the fastest-growing sector.

1.1 Learning Objectives: After studying this chapter, you should be able to know

The rate of service sector growth in India Major service sectors in India

1.2 Keywords: service sectors, growth, Gross domestic product.

1.3 Service sector growth in India

The services sector, with around 52 per cent contribution to the Gross Domestic Product (GDP) in 2014-15, has made speedysteps in the past period and a half to emerge as the largest and one of the fastest-growing sectors of the economy. The services sector is not only the dominating sector in India’s GDP, but has also gainedsubstantial foreign investment flows, contributed significantly to exports as well as 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.

Market Size– The services sector contributed US$ 783 billion to the 2014-15 GDP (at constant prices). Out of overall services sector, the sub-sector comprising financial services, real estate and professional services which contributed US$ 305.8 billion or 20.5 per cent to the GDP. The third-largest sub-segment comprising trade, repair services, hotels and restaurants contributed nearly 12.5 per cent to the GDP.

Investments-The Indian services sector has attracted the highest amount of FDI equity inflows in the period April 2000-September 2015, which is about 17 per cent of the total foreign inflows, according to the Department of Industrial Policy and Promotion (DIPP). Some of the developments and major investments by companies in the services sector in the recent past are as follows: Credit Analysis and Research (CARE Ratings) has signed Memorandum of Understanding (MoU) with Japan Credit Rating Agency, Ltd (JCR) to collaborate with each other as strategic business partners. For example: Shuttl, an Indian bus aggregator platform headquartered in Gurgaon, has raised US$ 20 million in Series.

See more at: http://www.ibef.org/industry/services.aspx#sthash.oLY4We75.dpuf

Major service sectors in India:

1. Tourism and travel service sector

a) Hotel services

b) Hospitality Service Sector

2. Insurance service sector

3. Education Services

4. Media services

5. Telecommunication services

6. Financial Services

1.Tourism and travel services:

It is the largest service industry in India. It provides heritage, cultural, medical, business and sports tourism. The main task of this sector is to grow and endorse tourism, maintain competitiveness of India as tourist destination and improve and expand existing tourism products to ensure employment generation and economic growth. Travel and tourism businesses try to target consumers’ needs, helping them sort through all their flight, hotel and recreational options. In order for tourism businesses to succeed, they rely on marketing professionals to link potential consumers with their services and operations.

Marketing operations involves designing advertisements or promotional offers that will draw customers attention towards a travel business. For accomplishing this task, marketers conduct surveys or interviews with target consumers in order to establish their needs, what they respond to and what they look for when choosing such an organization. Marketers must then be able to use this information to draft successful campaigns that wouldupturn business and profits.

(a) Hotel Marketing – Hotels are another major service industry in India. Their importance is undoubted. A large number of international hotel chains has been entered in India, either independently or with an Indian partner.The Indian tourism department has also recognized their importance and started categorizing them on the basis of the standard of their facilities.

Basic assumptions regarding hotel marketing are necessary. These are:

Hotel customers are referred to as ‘guests’ as they receive hospitality by way of accommodation, food and drink or all for which they pay. If satisfied,only than they return to the hotel for receiving further paying hospitality.

A hotel is ‘immovable’ in contrast to a manufactured product or service which is mobile and can be taken from the venue of production to the size of consumption.

The demand for hotel facilities has a variety which a few manufactured products have.

Hotels are not only in competition with others hotels, but also with the products and services of other industries catering to discretionary expenditure.

These assumptions postulate that the economic viability of a hotel depends largely on three factors.

First, the speed with which demand for hotel facilities can be generated;

Second, the capacity to ensure and retain customer satisfaction which will result in repetitive business and expansion of business; and

Third, the package, tenor of atmosphere, service and quality which together constitute the hotel’s standing and image.

(B) Hospitality service sectors:

The Indian hospitality industry has appeared as one of the significant industries driving growth of the services sector in India. This industry isvery sensitive to the needs and desires of people. The riches of the hospitality industry have always been linked to the prospects of the tourism industry and it is the foremost demand driver of the industry. The Indian hospitality industry has documentedstrong growth fuelled by robust inflow of foreign tourists as well as increased tourist movement within the country.

v Major characteristics of the Indian hospitality industry are: High seasonality

The hotel industry experiences more demand during October–April, followed which the monsoon months entail less demand. Usually the December and March quarters catch in 60% of the year’s turnover for India’s hoteliers. However, this trend has been changed over the recent few years. Hotels have stretched various offerings to improve performance (occupancy) during peak period. These include targeting the conferencing segment and offering lucrative packages during that period.

Labour intensive

Qualitative manpower is crucialin the hospitality industry. This industry offers employment to skilled, semi-skilled, and unskilled labour directly and indirectly. Hotel owners in India tend to “over-spec” their hotels that results into leading to higher manpower requirement. With the entry of branded international hotel chain in the Indian industry across different categories, Indian hotel companies need to become more manpower efficient and reconsider their staffing requirements.

v Changing consumer dynamics and ease of finance

The country has acknowledge a change in consumption patterns. The middle class population with higher disposable incomes has caused the shift in spending pattern, with discretionary purchases forming a substantial part of total consumer spending. Increased affordability and affinity for leisure travel are driving tourism in India and in turn aiding growth of the hospitality industry. Emergence of credit culture and easier availability of personal loans have also driven growth in the travel and tourism and hospitality industries in the country.

Trends in the industry

The hospitality industry recorded healthy growth in early-2000, leading to a rise in occupancy rate during 2005/06 and 2006/07. Consequently, average rates for hotel rooms also increased in 2006/07. The rise in average rates was also a result of the demand-supply gap for hotel rooms, especially in major metros. Hotels were charging higher rates, at times much higher than that those charged by their counterparts in other parts of the world.

Lured by higher returns experienced by the hotel industry, a number of players, domestic as well as international, entered the space. India became one of the most attractive destinations for such investments.

While on the one hand, investments continued to flow into the hotel industry, hit by sharp rise in rates, corporates started looking for alternate cost-effective lodging options. This led to emergence of corporate guest houses, especially in major metros, and leased apartments as replacements for hotels. While average room rates rose in 2007/08, occupancy rates dropped. Occupancy rates plunged sharply next year, as demand declined following the global economic slowdown and the terror attacks in Mumbai. As a result, hotel rates declined during 2009-10.

The hospitality industry reported improvement in 2009-10, with domestic tourist movement in the country being at a high. While average rates remained lower, occupancy rates rose, supported by surge in domestic tourist movement. The industry is expected to report healthy growth in 2010/11, with expected increase in domestic tourist movement and rise in international tourist arrivals.

v Marketing strategies in Hospitality Services

Marketing strategies in the hospitality industry have changed drastically over the past decade. Few years back, the brand name of the hotel was a major driver. But with the arrival of well educated and experienced travelers, hotel companies have had to change their marketing strategies. Today, hotel companies marketing strategies are differentiation, consistency, customer satisfaction, delivery of brand promises, and customer retention. Use of technology have also transformed the working of hotel companies like creating the need for online marketing. That is why blogs, networking sites, and travel sites are being used for making choices and the information provided tends to influence opinion and choice of customers.

Opportunities

In India the prospects for the hotel industry are bright. With revival in the global economy, international tourist inflow into the country is expected to rise. Additionally, hosting of international sports events and trade fairs and exhibitions in the country has also increased the expectation to improve the inflow of international tourists and domestic tourist movement. The upcoming industrial parks, manufacturing facilities and ports across the country provide a good opportunity for budget and mid-market hotels. The increase in room inventories is expected to make the hotel industry more competitive and hotels would be under pressure to maintain quality and service levels at competitive prices. Competitive pricing amongst the branded hotels along with the addition of more budget and mid-market hotels would make the hotel industry cost competitive with other destinations.

2.Insurance service sector:

The service industry has been late as compare tomanufacturing industry in adopting the marketing concepts. Even within the service industries, insurance has been amongst the last to switch over to marketing concept from its earlier sales orientation. Moreover withtheprivatization ofinsurancebusinessand entryofprivateagenciesthe role of marketing has become all the more important.Theterm‘Insurance Marketing’ referstothemarketingof insurance serviceswith the motto of customer orientation whichmakespossibleafairblending ofcustomer satisfaction andprofitgeneration.

Policy servicing

Policy servicingis animportantpartofmarketing activityasrepeatsales depend upon consumer satisfaction which in turndepends upongood servicing Pre-saleservicesin propertyinsurancemarketing consistsof proper study and analysisofinsurance needs, survey of the propertyproposed to be insuredand technicaladviceatthetimeof construction of a buildingand erection of machinery etc.whichwillminimizefireand otherhazardsand help reducepremiums.Postsale serviceswillinclude reminder for renewal, advice on modification of cover whenever property at risk undergoes a change,preference and settlementof claimsand so on.

New channels of distribution in Insurance sector–

Thevariouschannelswhichhavebeenintroducedandadopted totheIndianmarket are:

Intermediary channels–

Agents tied as well as independent

Brokers or multi tied agents

Banks and other financial institutions

Direct channels-

Company employees

Telephone Sales

Direct mails

Internet

Bank branches

v Internet as a Distribution Channel-

Internet plays vital role in providing information .In the current Indian market the customer is not aware about the inherent value of insurance. He thinks of insurance only in the month of March as a tax saving measure.

3. Educationsector

The Education sector in India is poised at a crucial stage in its growth. India’s demographic advantage of having a large population of youth, coupled with low gross enrolment ratios, presents a huge opportunity to education sector players.

At the same time, the growth of the Indian economy and upward movement of income levels is boosting spend on Education, which already accounts for the second-highest share of wallet for middle-class households.

Additionally, the big entrepreneurs and private equity players are investing in education sector because of:

Steady cash flows

Recession-proof nature of the sector

Negative working capital requirements

Government support for the sector has also seen a boost, with substantial reforms and increased financial outlays being announced and implemented. These reforms aim at not only strengthening the sector but facilitating planned expansion of the sector.

The interplay of all these factors has made Education an attractive sector with multiple opportunities, as can be seen by the high growth many players are witnessing and pursuing.

The key policy making agencies for higher education are:

• Ministry of Human Resource Development (Higher Education Department) – lays down the National Policy on Education

• Central Advisory Board of Education (CABE) – coordination and cooperation between the Union and the States in the field of education

• State Councils for Higher Education – coordination of roles of Government, Universities and apex regulatory agencies in higher education within the State. Though a significant part of the Indian higher education system is regulated, there are certain areas that are not.

As a result, the opportunities for the private players can be divided into two segments as shown on the following page

4. Media Service Sector

Media is the most powerful tool of communication. It gives a real exposure to the mass audience about what is right or wrong. Even though media is linked with spreading fake news like a fire, but on the safe side, it helps a lot to inform us about the realities as well.

TYPES OF MEDIA

Magazine Newspaper

Software Publishing Internet

Blogs (Web Logs)

MASS MEDIA CAN BE USED FOR VARIOUS PURPOSES

Advocacy, both for business and social concerns. This can include advertising, marketing, propaganda, public relations, and political communication
Entertainment, traditionally through performances of acting, music, and sports, along with light reading;
Public service announcements.

TOOLS FOR MEDIA MARKETING

a) Word of Mouth

b) Propaganda

c) Brand Infiltration

d) Customer Engagement

e) Undercover Marketing

f) Evangelism Marketing

g) Language

5.Telecommunication Services

Telecommunication is the assisted transmission of signals over a distance for the purpose of communication. In earlier times, this has been involved the use of smoke signals, drums, semaphore, flags or heliograph. In modern times, telecommunication typically involves the use of electronic transmitters such as the telephone, television, radio or computer

TELECOM REGULATORY AUTHORITY OF INDIA (TRAI)

The Telecom Regulatory Authority of India was established in 1997 through an Act of Parliament, namely, the Telecom Regulatory Authority of India Act, 1997 as amended by TRAI (Amendment) Act, 2000. The thrust of consumer protection derives from the preamble to the Act as reproduced below

“An Act to provide for the establishment of the Telecom Regulatory Authority of India and the Telecom Disputes Settlement and Appellate Tribunal to regulate the telecommunication services, adjudicate disputes, dispose of appeals and to protect the interests of service providers and consumers of telecom sector to promote and ensure orderly growth of the telecom sector and for matters connected therewith or incidental thereto.

Concept of Telecom Marketing

Telecom Marketing is about creating a competitive advantage by being the best at understanding, communicating, and delivering and developing existing customer relationships in addition to creating and keeping new customers. The concept of the product life cycle is giving way to customer life cycle, focusing on developing products that anticipate the future needs of existing customers and creating services that extend the existing customer relationship beyond the mere transaction. The customer life cycle will focus on lengthening the life span of the customer with the organization rather than the endurance of a particular product. Customers have changing needs as their life styles alter- the development and provision of products and/or services that continuously seek to satisfy those needs is good Telecom Marketing .A good Telecom Marketing Strategy will take the business vision and apply it to the customer base. Following are the marketing strategies being adopted by telecommunication sector:

Cross-function interaction Strategic Alliance Partner Market Entering Strategies

Market segmentation-Geographical Market Positioning

Pricing Strategies Promotional Mix

6. Financial service sector: In this we will discuss about Banks-Bank Marketing – The Concept

The new concept of bank marketing assigned due weightage to customer satisfaction. It aimed at having a full view of customer’s needs, fulfilling the identified needs in the best possible way by required services, identification of potential customers and conducting the activities at the branches on the basis of market segmentation. Thus, regarding the bank marketing concept, it is right to mention that it is a managerial process by which services are matched with markets. The matching of services with market is meant formulation of overall marketing strategies which suit the taste, temperament, needs and requirements of customers.

Marketing process as applicable to banks includes the following steps:

(a) Identification of Customer Needs

(b) Segmentation of Market

(d) Price Determination for Bank products.

(e) Setting up Distribution Channels

(f) Promotion of the Product

(g) Training in Marketing

(h) Forecasting and Research.

Conclusion:

Service sector plays a vital role in developing economies.The service sector consists of the “soft” parts of the economy, i.e. activities where people offer their knowledge and time to improve productivity, performance, potential, and sustainability, which is termed as affective labour. The services sector is not only the dominant sector in India’s GDP, but has also attracted significant foreign investment flows, contributed significantly to exports as well as 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.

Learn More:

Ravi Shanker, ‘Services Marketing: The Indian Perspective’, Excel Books.
Lovelock, ‘Services Marketing: People, Technology, Strategy’, Pearson Education.
Zeithaml and Bitner, ‘Services Marketing: Integrating Customer Focus Across the Firm’, Tata McGraw Hill.
Rust, Zahorik, and Keiningham, ‘Service Marketing’, Addison Wesley.