Introducing Services

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

Goods-Services Continuum 2

FoodTobacco

PublicTransportation

MedicalCare

Social Clubs

0 50 100

Personal Consumption Expenditure Related to Services Rathmell (1966)

Goods-Services Continuum 3

SaltNecktie

Tailoredsuit

FastFood

TelevisionAdvertising

Teaching

Marketing Services:the 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

Characteristics of Services

Intangibility

Inseparability

Variability

Perishability

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

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

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

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

A Classification Framework Tangible actions directed at people’s 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 people’s minds- education, broadcasting, museums

Intangible actions directed at intangible assets- banking, legal services, accounting, insurance

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

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

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

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?

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

Intangible Elements

Personal contact with the service personnel

The atmosphere generated by the service environment

Emotions felt by the customer

Core Service

What needs are we meeting?- public transportation: safe, reliable

transportation- CPA: peace of mind- Hotel: hospitality, rest- Health club: improve

appearance, health

Satisfaction

Satisfaction = Performance - Expectations Performance < Expectations = Dissatisfaction Performance > 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?)

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

Typology of Risks

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

Jacoby and Kaplan (1972)

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?