CLASSIFICATION OF SERVICES. (FRAMWORKS FOR ANALYSIS OF SERVICES).
Problem: narrow exposure of managers to the variety of service industries; managers perceive their
service as unique; management personnel is usually inbred; as a result, marketing thought in the
field of services is underdeveloped.
E.g., hoteliers often spend their whole life in the industry or even one company, most airline
managers have grown up in the commercial aviation industry, bankers and hospital administrators
usually work within the confines of banking and health care, respectively.
Managers from manufacturing sector find themselves unprepared to deal with servicing problems.
Services are neither a homogeneous group, nor different in-between according to industry
classification. Services can be segmented into clusters that share certain marketing-relevant
characteristics.
Classifications.
Import from tangible products domain:
- Copeland’s convenience, shopping, specialty goods. (Retail service institutions can also use this
approach; e.g., from financial services providers to restaurants).
- Durability. (For services: durability of benefits is relevant to repurchase frequency).
- Consumer/industrial. (Different evaluation of competing alternatives, purchasing procedures
and usage behavior is also transferable to services).
Operations approach to classification: every service is different (insisting that airlines’ marketing
has nothing to do with banks, insurance, motels, etc.).
However, marketing views demonstrate a lot of similarities in sharply different services; valid
classification highlights implications for managers – concepts and strategies can be shared between
industries.
Classification will have managerial value if it offers strategic insight – i.e. implications for
managers. This includes both the core and supplementary services.
CATEGORIZING SERVICE PROCESS:
WHAT IS THE NATURE OF THE SERVICE ACTIVITY?
Different types of processes result in different levels of customer involvement.
If services are “deeds, acts, or performances”, two questions arise:
- at whom (or what) is the activity directed;
- is the activity tangible or intangible.
What is the nature of the
service act?
Tangible actions
Who or what is the direct recipient of the service?
People
Possessions
I. Service directed at people’s bodies:
II. Services directed at physical possessions:
- passenger transportation;
- freight transportation;
- health care;
- repair and maintenance;
- lodging;
- warehousing/storage;
- beauty saloons;
- janitorial services;
- physical therapy;
- retail distribution;
- fitness centers;
- laundry and dry cleaning;
- restaurants;
- refueling;
- haircutting;
- landscaping/lawncare;
- funeral services
- disposal/recycling.
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Services analysis frameworks
Intangible actions
III. Services directed and people’s minds:
- advertizing/PR;
- arts and entertainment;
- broadcasting/cable;
- management consulting;
- education;
- information services;
- concerts;
- psychotherapy;
- religion;
- voice telephone.
IV. Services directed at intangible assets:
- accounting;
- banking;
- data processing;
- data transmission;
- insurance;
- legal services;
- programming;
- research;
- securities investment;
- software consulting.
I. People processing.
Managers should think about the process and output in terms of what happens to the customer (or
other object process) to identify what benefits are being created.
Reflecting on the service process itself helps to identify some of the non-financial costs – time,
mental and physical effort, and even fear and pain – that customers incur in obtaining the services.
Critical factors:
- moving to the “service” factory (or service people going to clients);
- getting into contact and cooperation;
II. Possession processing.
Frequently – quasi-manufacturing operations.
The services are the entire chain of activities that may take place during the lifetime of the object in
question.
Receivers are not necessary to be present.
III. Mental stimulus processing.
Strong ethical standards and careful oversight may be required.
Receivers’ physical presence is not necessary, but communication/participation is required.
IV. Information processing.
Customer involvement is determined by traditions and personal desire; operationally it is not
required.
Insights and implications.
The model helps answering a question “what business are we in?” and formulating the benefits
provided by services to the users.
Customer satisfaction is influenced by:
- encounters with service personnel;
- appearance and features of service facilities – both exterior and interior;
- interactions with self-service equipment;
- characteristics and behavior of other customers.
Advancement of telecommunication forms a uniform channel for informational-type services
delivery - internet.
Trend is the move from “high-contact” service into a “low-contact” with offering customers greater
convenience.
HOW IS THE SERVICE DELIVERED?
Issues:
- the current method of delivery and
- the number of distribution sites.
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Services analysis frameworks
Key question: does the firm currently require customers to be in direct physical contact with
personnel, equipment, and facilities?
If the firm does require direct physical contact, do customers have to visit the facilities of the
service organization or will the latter send personnel and equipment to customer’s own sites?
Alternatively, can transactions between provider and customer be completed at arm’s length?
Another issue: distribution – does the company require one or multiple distribution sites?
Nature of interaction b/w
customer and service
organization
Customer goes to service
organization
Service organization
comes to customer
Customer and service
organization transact at
arm’s length (mail or
through Internet)
Availability of service outlets
Single site
-
Theater;
Barbershop.
Lawncare service;
Pest control service;
Taxi
Credit card company;
Local TV station.
Multiple sites
-
Bus service;
Fast-food chain.
Mail delivery;
Auto club road service.
-
Broadcast network;
Telephone company.
Insights and implications.
How and where service is delivered forms the basis of distribution strategy. It also affects the nature
of customers’ service experiences – including the encounters they have with specific service
personnel – and impacts the cost they incur in obtaining service.
Combination of facilities, equipment and personnel generate value and costs.
Key issues: convenience; costs involved in travel; appeal of the retail facilities relative to competing
alternatives.
Mostly, companies require customers to visit the “factory”. However, niches of premium customers
should be considered, who agree to pay for the servicemen visit.
WHAT IS THE NATURE OF DEMAND FOR THE SERVICE?
Empty seats in an airplane or rooms in a hotel are lost forever if unoccupied.
Productive capacity of an auto repair shop is wasted if no one brings a car.
Conversely, when demand for service exceeds supply, the excess business may be lost.
However, demand and supply imbalances are not found in all service situations.
Extent to which supply is
constrained
Peak demand can usually
be met w/o a major delay
Peak demand regularly
exceeds capacity
Extent of demand fluctuations over time
Wide
-
Electricity;
Natural gas;
Telephone;
Hospital maternity unit;
Police and fire emergencies
Accounting and tax preparation;
Passenger transportation;
Hotels/motels;
Restaurants;
Theaters.
Narrow
-
Insurance;
Legal services;
Banking;
Laundry and dry cleaning.
(Services, similar to those in cell above, but
which have insufficient capacity for their
base level of business).
Insights and implications.
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Services analysis frameworks
Managing demand is the major challenge for many service marketers, especially in peopleprocessing and possession-processing services when opportunities to manage the level of physical
capacity (facilities or personnel) are tightly constrained.
Questions, managers should answer:
Are demand fluctuations cyclical, what is the cycle period?
What are the underlying causes of fluctuations?
Do fluctuations reflect customer habits that can be changed by marketing? Or are they formed by 3d
parties (working or classroom hours)? Or random events?
Smoothing demand is done through marketing strategies that affect customer behavior or queuing
system (which inventories demand rather than supply). Reservation system can also be
implemented. (What other implementations are possible to smooth demand?).
WHAT ARE THE ATTRIBUTES OF THE SERVICE EXPERIENCE?
Equipment- or people-based, or both.
The parameters are rather continuous.
Insights and implications.
The greater the degree of physical involvement by the customer in the service process, the more
likely service personnel, equipment, and facilities are to form an important part of the service
experience.
Customers may choose suppliers by the appraisal of these elements and evaluation of the output.
Managers may get insights from other service businesses with similar facilities/people emphasis.
(E.g. hospitals may import from hotels, public accounting firm – management consulting company).
However, marketing strategies used by one type of service in an industry may not be generalizable
to other services offered by that same industry (e.g. conventional and electronic banking, hotels and
motels).
People based services are harder to manage than equipment-based (in general).
General trend – switch to self-service (in what industries?).
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Services analysis frameworks
WHAT TYPE OF RELATIONSHIPS DOES THE SERVICE ORGANIZATION HAVE WITH
ITS CUSTOMERS?
Continuous relationship or discreet transaction?
Nature of service delivery
Continuous delivery of
service
Discrete transactions
Type of relationship between the service organization and its customers
Membership relationship
No formal relationship
- Insurance;
- Radio station;
- Cable TV subscription;
- Police protection;
- College enrollment;
- Lighthouse;
- Banking
- Public highway.
- Long-distance calls;
- Car rental;
- Theater series subscription;
- Mail service;
- Travel on commuter ticket;
- Toll highway;
- Repair under warranty;
- Pay phone;
- Health treatment for HMO member.
- Movie theater;
- Public transportation;
- Restaurant.
Insights and implications.
Advantage of membership relationships is that it knows who its current customers are and, usually,
what use they make of the services offered.
Pricing also is “easier” with membership relationship through periodic (monthly) fees.
However, multiple transaction payments may seem more fair.
Continuous delivery is typical only for “public goods”.
Discrete transactions make customers “anonymous” what makes marketing harder, since suppliers
are less informed about who their customers are and what use each customer makes of the service.
In general, businesses tend to create formal on-going relationships with customers. (Why?
Examples?)
HOW MUCH ROOM IS THERE FOR CUSTOMIZATION AND JUDGMENT?
In contrast to “tangible world”, services are frequently custom made.
Customization can proceed at least at two dimensions:
- how much the characteristics of the service and its delivery system lend themselves to
customization and
- how much judgment customer-contact personnel are able to exercise in defining the nature of
the service received by individual customers.
Extent to which customercontact personnel exercise
judgment in meeting
individual customer needs
High
Low
Extent to which service characteristics are customized
High
Low
-
Legal services;
Health care/surgery;
Architectural design;
Real estate agency;
Taxi service;
Beautician;
Plumber;
Education (tutorials).
Telephone service;
Hotel services;
Retail banking (excluding major
loans);
Good restaurant.
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-
Education (large classes);
Preventive health programs.
-
Public transportation;
Routine appliance repair;
Fast-food restaurant;
Movie theater;
Spectator sports.
Services analysis frameworks
Insights and implications.
Customization has its costs.
Constant struggle b/w marketing (add value) and operations (reduce costs through standardization).
Customization is not necessarily important to success.
Standardized services tend to imitate customization (naming clients in hotels, morning calls, etc).
In general, customers like to get expected results.
In first quadrant, providers’ role is first diagnosing the nature of the situation and then designing a
solution. In this case neither provider nor receiver have clear vision what the result will be.
Dividing the service in to diagnosis and implementation can be the options.
Trial encounters can also remedy the uncertainty to some degree.
OTHER APPROACHES TO CLASSIFICATON
Duration of benefits. Implications – relationships with clients (random vs. long-lasting ties).
Duration of service delivery. (Telephone call vs. college). Longer services make more likely longer
relationships with supplementary services.
(Your service classification ideas?)
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Services analysis frameworks