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CHARACTERISTICS OF SERVICESECTOR MANAGEMENT,

WITH SPECIAL ATTENTION TO

BANKING Presented to :

Prof. Anshu. J



Introduction to Service

• Growing significantly for more than fifty years.• More people earn their living from producing

services

• Three quarters of the population in the unitedstates and the european union are employed inservice industries.

• Manufacturing and technology industries have alsorecognized the need to provide services



Concept of ‘Service Marketing’

• It is a managerial process of managing theservices.

•

It is an organized effort for providing a soundfoundation for the development of anorganization.

•It is a social process helping an organization tounderstand the emerging social problem and totake part in the social transformation process to

justify its existence in the society.



Characteristics Of Service Marketing

Intangibility

Heterogeneity Perishability

Inseparability

Service Marketing



Intangibility

• Service is not tangible, as stated by Berry: “A goodis an object, a device, a thing; a service is a deed, aperformance, an effort" (Berry, 1984).

• Services cannot be stored• Services cannot readily be displayed,

• Demonstrated or Communicated• Process is difficult to set and keep adjusted

• No patent protection if protection is possible for

services



CURRENT SCENARIO

• Significant opportunity isopening up for intangibleasset-rich companies inthe area of debtfinancing.

• Debt financing securedon tangible assets such asreceivables, property andplant and machinery has

increased significantly inrecent years and is nowrelatively common place.

• Securitising intangibleassets, however, is lesscommon.

• If you consider thatperhaps 70% of the value

of most companies is inintangible assets such asbrands, copyrights andpatents, this represents a

considerable opportunityindeed.



Inseparability

• Services is that production takes place simultaneouslywith consumption.

• Generally, goods are first produced, sold, and thenconsumed.

• Services on the other hand are usually sold first, andthen produced and consumed simultaneously.

• Customer interacts with service production and deliverysystems and the service environment. Customer may bepart of the product, production, and the delivery system.

• No clear distinction between marketing, human resourcemanagement and operations management can be made.



Example

• a customer cannot get a home equity loan without, at

some point, interacting with somebody at the bank.

• banks have installed PC banking system that enablecustomers to communicate, directly or through a third

party, with their accounts on the bank’s computer;

• Telephone banking systems that enable customers totransfer funds between accounts;

• ATMs that enable customers to make deposits andwithdrawals without entering a branch; and

• Cedit cards that allow approved customers to obtaincredit repeatedly without interacting with a bank

employee.



Heterogeneity

• Compared to goods, service are normally lessstandardized and uniform.

• Services are not homogeneous.

• Service industries tend to differ regarding the extent towhich they are "people based" or "equipment-based"(Thomas, 1978).

• Services cannot be standardized

• Quality control is difficult



Example

• Heterogeneity in the response of banks to a change inmonetary policy is an important element in thetransmission of this policy through banks.

• This paper examines the role of bank liquidity,capitalization and market power as internal factorsinfluencing banks’ reaction in terms of lending and risk-taking to monetary policy impulses.

• It is argued that the extensive heterogeneity in banks’

response identifies overlooked consequences of bankbehaviour and highlights potential monetary sources ofthe current financial distress.



Perishability

• Services cannot be stored, hence services are highlyperishable, and e.g. empty tables in a restaurant can seeas a revenue opportunity lost for ever.

• Time cannot be held over for future sale, thus, servicescannot be inventoried.Service marketers need thereforeto manage not only the demand, but also the supply sothat a profitable equilibrium is consistently obtained.

• Services cannot be inventoried.



Example

• A lockbox operation can process only a limited numberof items in a day.

• Banks have responded by turning to electronic means ofhandling excess capacity.

• Most banks now provide a telephone customer-servicecenter to answer many of the questions that tie upbranch staff and keep them from performing otherduties, such as selling.



STABILITY IN INDIAN BANKS

• traditional “competition-fragility” view

• alternative “competition-stability”

• Theories - business environment, using data for 8,274

banks in 29 developed nations and 827 banks in 60developing nations.

• For developing nations, the results are more mixed anddependent on the measure of market power.




• In India, banks’ lending to

individual is based on theirincome. The banks doreligiously verify anindividual’s income andexpenditure beforesanctioning any loans.

• Mortgage loan still insists ondown payment (15% to30%)& this prevented manywho dreamt of havingproperties completely atbank’s expense.

• 70% of the banks in India

are still nationalized.

• RBI issued market

stabilization schemes andbonds and absorbeddollars; now if overseasinvestors suck out dollars

after selling shares, thereis no shortage of dollarsto sell to them; and, therewill be no domesticliquidity crisis becausethe RBI can buy backthose bonds and pumprupees into the market.




• RBI has made banks keep7.5 per cent of theirdeposits in cash, andanother 25 per cent oftheir deposits in

government bonds. Soeven if there were to be arun on a bank they stillwould have the liquidity

to tackle the situation.• RBI insists the bank to

keep the capital ratioswithin the range of 11%

to 13% (Regulation is 9%)

• Indian banks are notfocusing on the businessstructure likesecuritization andcollateralized debtobligation (CDO) – Againthanks to RBI regulations.

• Another crucial factorRBI had the right person

in the right job at righttime. He was Y V Reddy,the former RBI governor(6th Sept 2003 to 5th Sept

2008).




• Last but not the least -Culture – Indians are notvery comfortable withcredit. Indians generallythink, “If you spend morethan you earn, you willget in trouble“.

• In India, joint familiesstill exist and familymembers help each other

in times of economiccrisis so they don’t go tobanks to borrow money.



FUTURE OF BANKING

• Returning stability to the banks and the banking systemsa speedy recovery

• directors are preoccupied with the short-term actionsrequired to save their bank.

• economic conditions are so dire that management mustrise above the distractions to take an uncompromisinglook at their businesses and not let long-term economicstability be consumed by crisis management.

• Strategy;

• Business model;

• Capital, risk and governance; and

• People and rewards.



• We are glad to share our

knowledge with you

• Thank you for your

support

and

patience

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