Understanding the Service Sector - Principles of service marketing management

Understanding Services

Services make up the bulk of today's economy, not only in the United States and Canada where they account for 73 percent and 67 percent of the gross domestic product (GDP), respectively, but also in other developed industrial nations throughout the World. Shows how service industries contribute to the economy of the United States relative to manufacturing, government (itself mostly services), agriculture, mining, and construction.

The service sector accounts for most of the new job growth in developed ountries. In fact, unless you are already predestined for a career in a family manufacturing or agricultural business, the probability is high that you will spend your working life in companies (or public agencies and nonprofit organizations) that create and deliver services.

As a nation's economy develops, the share of employment between agriculture, industry (including manufacturing and mining), and services changes dramatically. Shows how the evolution to a service dominated employment base is likely to take place over time as per capita income rises. Service jobs now account for 76 percent of private sector payrolls in the United States, with wages growing at a faster pace than in manufacturing jobs.

In most countries, the service sector of the economy is very diverse and includes a wide array of different industries, ranging in size from huge enterprises that operate on a global basis to small entrepreneurial firms that serve a single town.

It comes as a surprise to most people to learn that the dominance of the service sector is not limited to highly developed nations. For instance, World Bank statistics show that in many Latin American and Caribbean nations the service sector accounts

Service sector: the portion of a nation’s economy represented by services of all kinds, including those offered by public and non profit organizations.

Service sector

Internal services: service elements within any type of business that facilitate creation of, or add value to, its final output.

Internal services

For more than half the gross national product (GNP) and employs more than half the Labor forces. These countries often have a large "underground economy" that is not captured in official statistics. In Mexico, for instance, it has been estimated that as much as 40 percent of trade and commerce is “informal." Significant service output is created by undocumented work in domestic jobs (e.g., cook, housekeeper, and gardener) or in small, cash based enterprises such as restaurants, laundries, rooming houses, and taxis.

Service organizations range in size from huge international corporations like airlines, banking, insurance, telecommunications, hotel chains, and freight transportation to a vast array of locally owned and operated small businesses, including restaurants, laundries, taxis, optometrists, and numerous business to business ("B2B") services.

Franchised service outlets—in fields ranging from fast foods to bookkeeping combine the marketing characteristics of a large chain that offers a standardized product with local ownership and operation of a specific facility. Some firms that create a time sensitive physical product, such as printing or photographic processing, are now describing themselves as service businesses because speed, customization, and convenient locations create much of the value added.

There's a hidden service sector, too, within many large corporations that are Classified by government statisticians as being in manufacturing, agricultural, or natural resources industries. So called internalservices cover a wide array of activities including recruitment, publications, legal and accounting services, payroll administration, office cleaning, landscape maintenance, freight transport, and many other tasks.

To a growing extent, organizations are choosing to outsource those internal services that can be performed more efficiently by a specialist subcontractor. As these tasks are outsourced, they become part of the competitive marketplace and are therefore categorized as contributing to the service component of the economy. Even when such services are not outsourced, managers of the departments that supply them would do well to think in terms of providing good service to their internal customers.

Governments and nonprofit organizations are also in the business of providing services, although the extent of such involvement may vary widely from one country to another, reflecting both tradition and political values. In many countries, colleges, hospitals, and museums are publicly owned or operate on a not for profit basis, but for profit versions of each type of institution also exist.


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