Introducing Services

1. Introducing Services

2. 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

3. Goods-Services Continuum 2 Food Tobacco Public Transportation Medical Care Social Clubs 100 0 50 Personal Consumption Expenditure Related to Services Rathmell (1966)

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

5. 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

6. Characteristics of Services • Intangibility • Inseparability • Variability • Perishability

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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?

16. 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

17. Intangible Elements • Personal contact with the service personnel • The atmosphere generated by the service environment • Emotions felt by the customer

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

19. 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?)

20. 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

21. Typology of Risks • Performance Risks • Physical Risk • Financial Risk • Psychological Risk • Social Risk • Time Loss Jacoby and Kaplan (1972)

22. 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?