Introducing Services
Goods-Services Continuum 1
n
Early definitions
- good as thing, service as an act
- where does utility lie:
in physical characteristics or in the act?
n
n
Most goods are a complex of goods and
facilitating services
Most services are a complex of services
and facilitating goods
Goods-Services Continuum 2
Food
Tobacco
0
Public
Transportation
Medical
Care
50
Social
Clubs
100
Personal Consumption Expenditure Related to Services Rathmell (1966)
Goods-Services Continuum 3
Teaching
Advertising
Television
Fast
Food
Necktie
Salt
Tailored
suit
n
Marketing Services:
the
3
Ps
People
- service personnel and customers
(appearance, attitude, social skills, etc.)
n
Physical Evidence
- appearance, design, layout of service
setting, brochures, promotional materials,
etc.
n
Process
- policies, procedures, mechanization, flow
of activities, employee discretion, customer
involvement
Characteristics of Services
n
Intangibility
n
Inseparability
n
Variability
n
Perishability
Intangibility
n
n
n
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
n
n
n
n
n
Products:
Production-Storage-SoldConsumed
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
n
n
n
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
n
n
n
n
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
n
Tangible actions directed at people’s bodies
- health care, passenger transportation, restaurants,
health clubs
n
Tangible actions directed at goods and other
physical possessions
- freight transport, landscaping, dry cleaning
n
Intangible actions directed at people’s minds
- education, broadcasting, museums
n
Intangible actions directed at intangible assets
- banking, legal services, accounting, insurance
Advantages of this Framework
n
n
n
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
n
The customer is physically present
n
The service and the delivery processes
are interdependent
n
The customer is in the interface when
he is visiting the factory
Questions Raised
Regarding Interface
n
How much physical presence of the
customer is necessary for the delivery of
the service to take place?
n
What is the nature of the customer contact
and the implications for service
management?
n
What is the ‘size’ of the interface?
- physical space, amount of time, # of activities
Uncertainty
n
Before
- customer uncertainty regarding readiness for
the service (education, fitness program)
- service provider does not fully understand
customer inputs
n
During
- Customers failing to comply with procedures
- Unrealistic demands or expectations
n
After
- What has been obtained from the service?
Tangible Elements
n
n
Items bought
Items whose status is altered
- repaired, improved
n
Items that are peripheral
- admission ticket, appointment card
n
Items that are central to the service
- ie. car of a rental company
n
Items that form part of the process
- computers, ATMs
Intangible Elements
n
Personal contact with the service
personnel
n
The atmosphere generated by the
service environment
n
Emotions felt by the customer
Core Service
n
What needs are we meeting?
- public transportation:
- CPA:
- Hotel:
- Health club:
safe, reliable
transportation
peace of mind
hospitality, rest
improve
appearance,
health
Satisfaction
n
n
n
n
n
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
n
n
Perceived risk is greater for services than for
products. Why?
Intangibility
- cannot see before purchase
n
Variability
- production machines are consistent, not humans
n
Guarantees
- traditionally, services have not provided
guarantees
n
Complexity
Typology of Risks
n
n
n
n
n
n
Performance Risks
Physical Risk
Financial Risk
Psychological Risk
Social Risk
Time Loss
Jacoby and Kaplan (1972)
Discussion Questions
n
n
n
n
n
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?