Chapter 4 THE SERVICE SECTOR and THE NEW ECONOMY Defining the New Economy Creating Value in the...
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Transcript of Chapter 4 THE SERVICE SECTOR and THE NEW ECONOMY Defining the New Economy Creating Value in the...
Chapter 4Chapter 4
THE SERVICE SECTOR and THE THE SERVICE SECTOR and THE NEW ECONOMYNEW ECONOMY
Chapter 4Chapter 4
THE SERVICE SECTOR and THE THE SERVICE SECTOR and THE NEW ECONOMYNEW ECONOMY
Defining the New EconomyDefining the New Economy
Creating Value in the Creating Value in the Service SectorService Sector
Succeeding in the New Succeeding in the New EconomyEconomy
►▼
◄
The Service Sector:The Service Sector:Creation of the New EconomyCreation of the New Economy
Service opportunities create value in business Service opportunities create value in business and consumer marketsand consumer markets
Services drive advanced economiesServices drive advanced economies
Estimated 50% of work in industrialized countries Estimated 50% of work in industrialized countries is knowledge workis knowledge work
A transition into an information-led economyA transition into an information-led economy [the “New Economy”][the “New Economy”]
Implication: competition in marketspace as well Implication: competition in marketspace as well as the marketplaceas the marketplace
New Economy IndicatorsNew Economy Indicators
Knowledge Knowledge JobsJobs
GlobalizationGlobalization
Dynamism/Dynamism/CompetitionCompetition
Digital Digital EconomyEconomy
Innovation Innovation InfrastructureInfrastructure
Evolutionary StagesEvolutionary Stages Model Model of Internet B2B Markets (Sharma)of Internet B2B Markets (Sharma)
InformationInformationInformationInformation
KnowledgeKnowledge
ConversationsConversations
Relationships
Relationships
E-CommerceE-Commerce
The EconomyThe Economy
The The traditional economytraditional economy - - agriculture, construction, agriculture, construction, manufacturing, wholesale, retail, etc.manufacturing, wholesale, retail, etc.
A dominant service sectorA dominant service sector
A A technology-based economytechnology-based economy - -high-tech companies, information high-tech companies, information firmsfirms
thethe Traditional Traditional EconomyEconomy
■ ■ The North American Industrial Classification System (NAICSSystem (NAICS)) replaces SICreplaces SIC
■ ■ Evolving, responsive industry Evolving, responsive industry categorization tool emphasizing new categorization tool emphasizing new services and technology sectorsservices and technology sectors
■ ■ Major uses: forecasting, market share Major uses: forecasting, market share analysis, research, segmentation, analysis, research, segmentation, strategic planningstrategic planning
■ ■ The North American Industrial Classification System (NAICSSystem (NAICS)) replaces SICreplaces SIC
■ ■ Evolving, responsive industry Evolving, responsive industry categorization tool emphasizing new categorization tool emphasizing new services and technology sectorsservices and technology sectors
■ ■ Major uses: forecasting, market share Major uses: forecasting, market share analysis, research, segmentation, analysis, research, segmentation, strategic planningstrategic planning
The The NAICSNAICS Hierarchy Hierarchy
Table 4-2:
The NAICS Hierarchy NAICS Level Industry Description NAICS Code
Sector Information 51
Subsector Broadcasting, telecommunications 513
Industry Group Telecommunications 5133
Industry Wireless carriers, except satellite 51332
US industry Paging 513321
Source: www.census.gov/epcd/www/naics.html
TANGIBLEATTRIBUTES
INTANGIBLEATTRIBUTES
"Pure" Product " Pure" Service
hardware restaurant insurance
Blended Products: Goods & Services
Service ContinuumService Continuum
TeachingNursing
The theatreAdvertising agency
Air travelTelevision
Fast-food restaurantTailored suit
AutomobileHouse
Dog foodNecktie
Salt
Balanced itemequally weighedbetween goodsand services
Service-dominatedService-dominateditem (intangible) item (intangible)
Good-dominatedGood-dominateditem (tangible) item (tangible)
Balanced
INTANGIBLE
VARIABLE
PERISHABLE
INSEPARABLE
Key Characteristics of Key Characteristics of ServicesServices
Pre-sale Services
Post-sale Services
Transaction Services
Continuum of ServicesContinuum of Services
ServiceService FirmsFirms Create Create ValueValue
Service firms now account for the majority Service firms now account for the majority of GDP and jobs in industrialized nationsof GDP and jobs in industrialized nations
The U.S. service sector – 6 key areasThe U.S. service sector – 6 key areas 1) Transportation and utilities1) Transportation and utilities 2) Wholesale trade2) Wholesale trade 3) Retail trade3) Retail trade 4) Fire, insurance and real estate (FIRE)4) Fire, insurance and real estate (FIRE) 5) Other consumer and business services5) Other consumer and business services 6) Government services6) Government services
What is a Service?What is a Service?■ Products can be defined as goods, services,
and ideas■Today’s economy is characterized
by relatively few pure goods■ Most consumer and business products are
packaged with strong service components
-> Service challenge: tangibilize the intangible
Examples of Service Components
Service warrantiesService warranties
Monthly rate plansMonthly rate plans
24-hour access to technical support24-hour access to technical support
Various other service optionsVarious other service options
8 Value-Adding Practices8 Value-Adding Practices
☛ ☛ PersonalizationPersonalization
☛☛ Offering tiered service levelsOffering tiered service levels
☛☛ Collecting information to enhance Collecting information to enhance customer experiencescustomer experiences
☛ ☛ Keeping information simpleKeeping information simple
8 Value-Adding Practices - 8 Value-Adding Practices - cont.cont.8 Value-Adding Practices - 8 Value-Adding Practices - cont.cont.
☛ Respond to what customers do not like doing ☛ Providing one-stop shopping ☛ Balancing customer self-service with support ☛ Get to know the customer best
EmergenceEmergence of theof the New Economy New Economy
The InternetThe Internet was the major change was the major change agent of the new economy in past decadeagent of the new economy in past decade
Period of explosive growthPeriod of explosive growth (1995-2000) (1995-2000) characterized by over-investment in:characterized by over-investment in:
->CRM (Customer Relationship Mgt.) ->CRM (Customer Relationship Mgt.)
->Systems->Systems
->Computer technology->Computer technology
->Liberally dispensed stock options ->Liberally dispensed stock options
Period of Period of rapid descentrapid descent (2000-2002 (2000-2002):):
** Failure of much-hyped virtual Failure of much-hyped virtual marketspace to achieve business marketspace to achieve business objectivesobjectives
** Thousands of online businesses and Thousands of online businesses and supporting companies failedsupporting companies failed
* * Hundreds of thousands of highly Hundreds of thousands of highly educated technology managers laid offeducated technology managers laid off
* * Inflated internet stocks crashedInflated internet stocks crashed
** Local economies of high-tech cities Local economies of high-tech cities negativelynegatively impacted impacted
The 21The 21stst
Century Century
NewNew
EconomyEconomy
The 21The 21stst
Century Century
NewNew
EconomyEconomy
The 21The 21stst
Century Century
New New
EconomyEconomy
The 21The 21stst
Century Century
New New
EconomyEconomy
Period of Period of Re-energizationRe-energization (2003):(2003):
* Stabilized and growing web sector; * Stabilized and growing web sector; only part of new economyonly part of new economy
* Growth in online sales* Growth in online sales
Major DriversMajor Drivers of of the New the New EconomyEconomy
TTechnologyechnology GGlobalizationlobalization MMarket deregulationarket deregulation CCustomizationustomization DDigitalizationigitalization CConnectivityonnectivity IIndustry convergencendustry convergence NNew types of intermediaries ew types of intermediaries
10 10 KKeyseys to to Successfully CompetingSuccessfully Competing in thein the New Economy New Economy
☛ ☛ Be Customer Oriented☛ Excel in Process Management ☛ Designing Winning Value
Propositions ☛ Providing Outstanding
Customer Service☛ Offer Innovative and High
Quality Products☛ Forge Strong Relationships
with Collaborators and Customers
☛ ☛ Be Customer Oriented☛ Excel in Process Management ☛ Designing Winning Value
Propositions ☛ Providing Outstanding
Customer Service☛ Offer Innovative and High
Quality Products☛ Forge Strong Relationships
with Collaborators and Customers
10 10 KKeyseys toto Successfully CompetingSuccessfully Competing inin the the
New EconomyNew Economy. . – cont– cont
☛ ☛ Stress Retention Marketing (RM) Stress Retention Marketing (RM) -keeping and growing accounts-keeping and growing accounts
☛ ☛ Seek Ways to Continually Add Seek Ways to Continually Add Value for CustomersValue for Customers
☛ ☛ Understand the Changing Understand the Changing Nature of the Global Business Nature of the Global Business EnvironmentEnvironment
☛ ☛ Have a Long-term Management Have a Long-term Management PerspectivePerspective
7 7 Strategic GuidelinesStrategic Guidelines toto Become CV Become CV Market LeadersMarket Leaders
Differentiate via Unique Business ModelsDifferentiate via Unique Business Models
Hire and Retain Great EmployeesHire and Retain Great Employees
Balance Marketing & Technology in the Balance Marketing & Technology in the
OrganizationOrganization
7 7 Strategic GuidelinesStrategic Guidelines toto Become CV Become CV
Market LeadersMarket Leaders Maximize the Usage of the Maximize the Usage of the
Customer DatabaseCustomer Database Be Super-responsive to Be Super-responsive to
CustomersCustomers Develop an Outstanding Develop an Outstanding
Internet StrategyInternet Strategy Create a “Buzz” for the Create a “Buzz” for the
BusinessBusiness
– – A RecapA Recap
Customers are theCustomers are the
most important assetmost important asset
to an organization! to an organization! Customer equity and relationship marketing Customer equity and relationship marketing
demonstrate that the value of a firm lies in demonstrate that the value of a firm lies in the the long-term value of its customerslong-term value of its customers rather rather than its brands. than its brands.
Customers want to do business with Customers want to do business with organizations when and how it is organizations when and how it is convenient for them to do so.convenient for them to do so.
The web must be an integral The web must be an integral part of every organization’s part of every organization’s business strategy business strategy
Successful new economy Successful new economy firms provide interesting firms provide interesting experiences for their experiences for their customers.customers.
Long-term relationships with Long-term relationships with these companies are due to these companies are due to high customer loyalty and high customer loyalty and retention rates.retention rates.
– – A Recap A Recap (cont.)(cont.)