Emergence of Service Economy

In this fast changing world, service industries have already overtaken goods industries in the wealth creation process at least in the developed countries. Manufacturing industries grew because they produced tangible goods which satisfied people’s physiological needs of food, shelter and clothing. As the basic needs was fulfilled there was demand for improved satisfaction, and this led to a proliferation of variations of the same product and a number of companies involved in its manufacture. The growth of service industries can be traced to the economic development of society and the socio-culture changes that have accompanied it.

Service sector is also one of the fastest growing sectors of Indian economy. One in two Indians earn their living from service sectors. This is a much diversified sector ranging from neurosurgeons to house maids. Three related events of 1990’s gave boost to service sector. Globalization of business and consumers taste powered boom in accountancy, law, entertainment and retailing. Explosion in IT sector fuelled sectors like telecom, software, finance and banking. The restructuring of manufacturing and stagnant agriculture further provided fuel to Indian economy to jump from agriculture to services.

In order to fully understand what service economy means and what its real challenges are, it is important to understand what are the reasons that are causing its emergence are. The following are the reasons for the emergence of service industries: Increasing affluence- Greater demand for services (activities which consumers used to perform themselves) such as interior decoration, laundry, care of household products such as carpets, care of garden etc. More leisure time- Greater demand for recreation and entertainment facilities, travel resorts, adult education and self improvement courses.

Higher percentage of women in labour force- Greater demand for creches, baby sitting, household domestic help. Greater life expectancy**- Greater demand for nursing homes and health care services. Greater complexity of products- Greater demand for skilled specialist to provide maintenance for complex products such as air conditioners, cars, home computers. Increasing complexity of life- Greater demand for specialists in income-tax, labour laws, legal affairs, marriage counseling, and employment services.

Greater concern about ecology and resource scarcity- Greater demand for purchased or leased services, car rental, travel, resort to time sharing rather than ownership basis. Increasing number of new products- The computer-sparked development of such service industries as programming, repair and time sharing. Marketing challenges in service business Managing, growing, and profiting with both product and service businesses are challenging tasks. But the challenges are different from one to the other. Listed below are some of the most common and difficult challenges of growing and managing consulting, professional, or technology service businesses that don’t necessary apply to product businesses.

Clients can’t see or touch services before they purchase them. This makes services difficult to conceptualize and evaluate from the client perspective, creating increased uncertainty and perception of risk. From the firm’s perspective, service intangibility can make services difficult to promote, control quality, and set price. Services are often produced and consumed simultaneously. This creates special challenges in service quality management that product companies do not even consider. Products are tested before they go out the door.

If a product has quality problems while in production, the company can fix them and customers are none the wiser. Service production happens with the customer present, creating a very different and challenging dynamic. Trust is necessary**. Some level of trust in the service organization and its people must be established before clients will engage services. This is as important, sometimes more important, than the service offerings and their value proposition. Competition is often not who you think. Competition for product companies is other product companies. Competition for service companies are often the clients themselves.

Sure, sometimes you find yourself in a competitive shootout (some firms more than others), but often the client is asking ‘should we engage this service at all’ and ‘if so, should we just do it in-house’. Brand extends beyond marketing. Brand in service businesses is about who you are as much as what you say about yourself. And internal brand management and communications can be equally as vital to marketing success as are external communications. Proactive lead generation is difficult**. Many service companies have tried, and failed, at using lead generation tactics that work wonders for product companies.

Implemented correctly, traditional product techniques, such as direct marketing and selling, can work for services, but the special dynamics of how clients buy services must be carefully woven into your strategy. Service deliverers often do the selling. Many product companies have dedicated sales forces. For services, the selling is often split between sales, marketing, professional, and management staff. Marketing and sales lose momentum. Most product companies have dedicated marketers and sellers. They market and sell continuously, regardless of the revenue levels they generate.

In many services companies the marketers and sellers also must manage and deliver. This can often lead to the Services Revenue Rollercoaster-wide swings between revenue and work overflow, and revenue and work drought. Passion is necessary, yet elusive. The more passion, spirit, hustle, and desire your staff brings to the organization every day, the more revenue and success you will have. The correlation between staff passion and financial success is direct and measurable (as is the correlation between lack-of-passion and organizational failure). Yet institutionalizing passion, while necessary, is agonizingly elusive. {draw:text-box}