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 Food Tobacco Public Transportation Medical Care Social Clubs 100 50 Personal Consumption Expenditure Related to Services Rathmell (1966)

Goods-Services Continuum 3 Teaching Advertising Television Fast Food Tailored suit Necktie Salt

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 During After 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?