Introducing Services

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Introducing Services
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Goods-Services Continuum 1

• Early definitions
• good as thing, service as an act
• where does utility lie
  in physical characteristics or in
  the act?
• Most goods are a complex of goods and
  facilitating services
• Most services are a complex of services and
  facilitating goods

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Goods-Services Continuum 2
Food Tobacco
Public Transportation
Medical Care
Social Clubs
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0
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Personal Consumption Expenditure Related to
Services Rathmell (1966)
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Goods-Services Continuum 3
Teaching
Advertising
Television
Fast Food
Tailored suit
Necktie
Salt
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Marketing Servicesthe 3 Ps

• People
• service personnel and customers (appearance,
  attitude, social skills, etc.)
• Physical Evidence
• appearance, design, layout of service setting,
  brochures, promotional materials, etc.
• Process
• policies, procedures, mechanization, flow of
  activities, employee discretion, customer
  involvement

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Characteristics of Services

• Intangibility
• Inseparability
• Variability
• Perishability

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Intangibility

• Difficult to know what an offer is before, during
  or even after receipt
• Measurement helps the consumer understand the
  service
• Providing some tangible evidence helps the
  consumer to judge the service
• prospectus
• written customer evaluations

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Inseparability

• Products Production-Storage-Sold- Consumed
• Services Sold-Produced Consumed at Same
  Time
• The customer is involved in production and
  delivery
• The method of production and delivery is more
  important for services than for products
• Implication stay close to the customer

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Variability

• Can be between firms, within firm, or even within
  an employee over time
• Training and standardization of procedures can
  help reduce variation
• Too much emphasis on increased productivity may
  mean that varying customer needs are not being met

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Perishability

• Cannot be stored for later sale or use
• If supply exceeds demand, the value of the
  service is lost
• If demand exceeds supply, backup cannot be taken
  from a warehouse
• Fluctuations in demand present greater problems
  for services than for products

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A Classification Framework

• Tangible actions directed at peoples bodies
• health care, passenger transportation,
  restaurants, health clubs
• Tangible actions directed at goods and other
  physical possessions
• freight transport, landscaping, dry cleaning
• Intangible actions directed at peoples minds
• education, broadcasting, museums
• Intangible actions directed at intangible assets
• banking, legal services, accounting, insurance

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Advantages of this Framework

• Highlights an important service characteristic
• Focuses on whom or what the service is directed
  at
• Categories are clearly distinct and collectively
  exhaustive

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Characteristics of the Interface

• The customer is physically present
• The service and the delivery processes are
  interdependent
• The customer is in the interface when he is
  visiting the factory

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Questions Raised Regarding Interface

• How much physical presence of the customer is
  necessary for the delivery of the service to take
  place?
• What is the nature of the customer contact and
  the implications for service management?
• What is the size of the interface?
• physical space, amount of time, of activities

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Uncertainty

• Before
• customer uncertainty regarding readiness for the
  service (education, fitness program)
• service provider does not fully understand
  customer inputs
• During
• Customers failing to comply with procedures
• Unrealistic demands or expectations
• After
• What has been obtained from the service?

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Tangible Elements

• Items bought
• Items whose status is altered
• repaired, improved
• Items that are peripheral
• admission ticket, appointment card
• Items that are central to the service
• ie. car of a rental company
• Items that form part of the process
• computers, ATMs

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Intangible Elements

• Personal contact with the service personnel
• The atmosphere generated by the service
  environment
• Emotions felt by the customer

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Core Service

• What needs are we meeting?
• public transportation safe, reliable
  transportation
• CPA peace of mind
• Hotel hospitality, rest
• Health club improve appearance,
  health

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Satisfaction

• Satisfaction Performance - Expectations
• Performance lt Expectations Dissatisfaction
• Performance gt Expectations Satisfaction
• Caution performance and expectations cannot
  be too low.
• What are your expectations for the speed of
  communications today? (what were they 20 years
  ago?)

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Perceived Risk

• Perceived risk is greater for services than for
  products. Why?
• Intangibility
• cannot see before purchase
• Variability
• production machines are consistent, not humans
• Guarantees
• traditionally, services have not provided
  guarantees
• Complexity

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Typology of Risks

• Performance Risks
• Physical Risk
• Financial Risk
• Psychological Risk
• Social Risk
• Time Loss

Jacoby and Kaplan (1972)
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Discussion Questions

• What makes products and services different?
• Do you work in a product or a service? Explain.
• How can we classify different services?
• Why are perceived risks greater for services than
  for products?
• Why is the interface important?