The
American marketing association defines services as activities, benefits or
satisfactions which are offered for sale and are provided with the sale of
goods. This definition is considered to be too broad as products also offer
benefits and satisfactions to customers. So there were attempts to
differentiate physical products from services by defining characteristics which
are present in services but are not found in case of physical products.
Kolter
defines a service as “any act or performance that one party can offer to
another that is essentially intangible and does not result in the ownership of
anything. It is production may or may not be tied to a physical product.” Brain
Payne defines it as “an activity which has some intangibility associated with
it, which involves some interaction with customers or with property with it,
which involves some interaction with customers or with property in their
possession, and does not result in a transfer of ownership. A change in
condition may occur and production of the service may or may not be closely
associated with a physical product.”
A
more mundane definition in the Indian context is provided by section 2(r) of
the monopolies and restrictive trade practices act, 1969. under the said
statute a “service means service which is made available to potential users and
includes the provision of facilities in connection with banking, financing,
insurance, chit fund, real estate, transport, processing, supply of electrical
or other energy, board or lodging or both, entertainment, amusement or the
purveying of news or other information”.
Stanton
defines services and identifies factors which distinguish products from
services which are accepted by most of the commentators. According to Stanton,
“services are those separately identifiable, essentially activities that
provide want-satisfaction, and that are not necessarily tied to the sale of a
product or another service. To produce a service may or may not require the use
of tangible goods. However, when such use in required, there is no transfer of
the title (permanent ownership) to these tangible goods”. Stanton emphasizes
four characteristics which distinguish services from product. They are,
intangibility, inseparability, heterogeneity and perishability and fluctuating
demand. Kotler also emphasizes intangibility, inseparability, variability and
perishability.
A
service is an activity which has some elements of intangibility associated with
it, which involves some interaction with customers or with property in their
possession, and does not result in a transfer of ownership. A change in
condition may occur and production of the service may or may not be closely
associated with a physical product.
Put
in the simple terms, ‘services are deeds, processes and performances’. The core
offerings of hospitals, hotels, banks and utilities comprise primary deeds and
actions performed for customers. Services are produced not only by service
business such as those just described but are also integral to the offerings of
many manufactured goods procedures. For example, care manufacturers offer
warranties and repair services for their cars; computer manufacturers offer
warranties, maintenance contracts and training. All of these services are
examples of deeds, processes and performances.
These
four have been identified by Kotler also as the major characteristics greatly
affecting the design of marketing programs for services.
Intangibility
Services
are essentially intangible, because services are performances or actions rather
than objects, they cannot be seen, felt, tested, or touched in the same manner
that we can sense tangible goods. For example, health-care services are actions
(e.g. surgery, diagnosis, examination, treatment) performed by providers and
directed toward patients and their families. These services cannot actually be
seen or touched by the patient, although the patient may be able to see and
touch certain tangible components of the service (e.g. equipment, hospital room).
In fact, many services such as health care are difficult for the consumer to
grasp even mentally. Even after a diagnosis or surgery has been completed the
patient may not fully comprehend the service performed. A services client will
never know how good the service is until after he receives it. In some cases,
it actually may be months or years before a trigger event occurs to activate
the service, at which time the client hopes to experience the promised service
quality
Marketing implications
Intangibility presents several marketing
challenges: services cannot be inventoried, and therefore fluctuations in
demand are often difficult to manage. For example, there is tremendous demand
for resort accommodations in smile / oozy in May, but little demand in December.
Yet resort owners have the same number of rooks to sell year-round. Services
cannot be patented legally, and new service concepts can therefore easily be
copied by competitors. Services cannot be readily displayed or easily
communicated to customers, so quality may be difficult for consumers to assess.
Decisions about what to include in advertising and other promotional materials
are challenges, as is pricing. The actual cost of a “unit of service” is hard
to determine and the price/ quality relationship is complex.
Services marketing professionals must determine how
to effectively communicate the services process, deliverables, and benefits in
order to build client confidence. Tangible signals that indicate services
quality and value come from personal interaction, trusted recommendations,
clear communications, equipment used or processes followed, pricing, and the
physical environment in which the business operates.
With promotions, a logo symbol can offer a sense of
tangibility the "good hands" of all state, the Merrill lynch bull,
the prudential insurance rock. Testimonials and case studies can be used to
build client confidence and rapport. The communications material itself (paper,
design, and content) can convey quality, too.
Pricing can also be an indicator of quality:
premium pricing often suggests higher quality, while prices that are too low
may hint at the inexperience, limited depth, or vague processes of the services
producer.
But tangibility must extend beyond promotions and
price. Because positive personal interaction and "chemistry" is a
gauge of quality to the client, marketing as a discipline must be influential
in the training of sales and service associates. These individuals literally
are the embodiment of marketing for the organization. Their ability to deliver
on the brand promise affects business success.
therefore, creating client relationships, setting
appropriate expectations, and learning to represent the company in an
acceptable way for instances through appearance, attitude, and communications,
should augment standard knowledge and process training because it is critical
to services delivery, the success of client interactions should be quantified,
measured, and improved with regularity.
Inseparability
The production
of the services cannot be separated from its consumption. For example, the production and consumption of a
medical exam happen together, as do many consulting services and it maintenance
contracts.
This leads to two important factors. First, the
client is, essentially, "in the factory," watching production all
along the way. It is very important for a service provider or consultant to
carefully manage the "production process" as the client is able to observe
it in action and make judgments about quality and value.
Second, the client often expects the service to be
provided in a specific way or by a specific individual and that can pose
challenges in assigning staff, managing the process, and ensuring the frontline
people display the appropriate knowledge, attitude, and appearance when
delivering the service.
Services
are created and consumed simultaneously and generally they cannot be separated
from the provider of the service. Thus the service provider-customer
interaction is a special feature of services marketing.
Unlike
the tangible goods, services cannot be distributed using conventional channels.
Inseparability makes direct sales as the only possible channel of distribution
and this delimits the markets for the seller’s services. This characteristic
also limits that scale of operation of the service provider. For example, a
doctor can give treatment to limited number of patients only in a day. This
characteristic also emphasizes the importance of the quality of provider –
client interaction in services. This poses another management challenge to the
service markets. While a consumer’s satisfaction depends on the functional
aspects in the purchase of goods, in the case of services the above mentioned
interaction plays an important role in determining the quality of services and
customer satisfaction. For example, an airline company may provide excellent
flight service, but a discourteous onboard staff may keep off the customer
permanently from that company. There are exemptions also to the inseparability
characteristic. A television coverage, travel agency or stock broker may
represent and help marketing the service provided by another service firm.
Marketing implications
Services
often are produced and consumed at the same time; mass production is difficult
if not impossible. The quality of service and customer satisfaction will be
highly dependent on what happens in “real time”, including actions of employees
and the interactions between employees and customers.
Services marketing professionals can encourage
client participation during the delivery process. As the client is engaged
through interviews, strategy sessions, regular communications, testing, and
face-to-face updates at major milestones, he gains confidence and builds
commitment to the engagement and relationship.
To manage distribution and pricing considerations
in the face of inseparability, the marketing professional can identify the
level of personalization that the client requires and the company can support. For
example, interactions can be managed through conference calls versus on-site
visits, or exchanges can be shifted from high-contact to low-contact operations
for instance personalized banking to tam or online banking. These changes
should be carefully evaluated to ensure client acceptance and positive brand
impact.
Inconsistence/heterogeneity/variability
This characteristic is referred to as variability
by Kotler. We have already seen that services cannot be standardized. They are
highly variable depending upon the provider and the time and place where they
are provided. A service provided on a particular occasion is somewhat different
from the same service provided on other occasions. Also the standard of quality
perceived by different consumers may differ according to the order of
preference given by them to the various attribute of service quality. For example,
the treatments given by hospital to different persons on different occasion
cannot be of the same quality. Consumers of services are aware of this
variability and by their interaction with other consumers they also get
influenced or influence others in the selection of service provider. Sometimes
called "heterogeneity," services quality and consistency are subject
to great variability because they are delivered by people, and human behavior
is difficult to control. Personal performance and quality can vary by time of
day (people get tired), time of month or year, workload, experience, attitude,
knowledge, and other factors. Maintaining client trust during lapses (which
will happen) is critical.
Also, variability is why it can be risky to have
one person make the sale and establish the relationship, and another deliver
the service. The original contact person is the one who reduced risk for the
client; when someone else delivers the service, the client may become agitated
or wary. Inconsistence is sometimes called "heterogeneity," services
quality and consistency are subject to great variability because they are
delivered by people, and human behavior is difficult to control. Personal
performance and quality can vary by time of day for instance people get tired,
time of month or year, workload, experience, attitude, knowledge, and other
factors. Maintaining client trust during lapses is critical.
Also, variability is why it can be risky to have
one person make the sale and establish the relationship, and another deliver
the service. The original contact person is the one who reduced risk for the
client; when someone else delivers the service, the client may become agitated
or wary.
The
marketing response:
The level of quality to be received can be
deliberately limited. It maintenance contracts frequently offer a range of
service packages. Standardizing some service offerings enables the organization
to be very specific in noting service and quality deliverables, thus decreasing
variability and meeting client expectations simultaneously.
When this method is used, variability can become a
point of differentiation as it enables flexibility and services customization.
When promoting services, marketers can overcome
client concern about service consistency in two ways through team introductions
and through positive referrals. The sales leader should make it clear that a
qualified team will work with the client, and schedule face-to-face
introduction and discovery sessions to smooth the next-phase transition
process.
In addition, positive word-of-mouth referrals,
written testimonials and case studies, or reference-able accounts can dispel
client concerns about variability.
Because things can and do go wrong, the services
producer should know how to deliver a professional client response. How quickly
the response is delivered is critical. The objective is to maintain client
trust; so shifting blame, explaining it away, or ignoring it can further damage
the relationship. The services producer should provide an apology, fix the
problem or situations quickly, make up for the inconvenience with additional
free services or a token of appreciation, and determine the reason for the
error and fix it at the root even if it means people or process changes.
Finally, research shows that employee satisfaction
is the most important factor in providing high quality service. Potential
client interaction problems can be minimized through adequate training,
empowering employees to make more customer-focused decisions, and rewarding
them for positive customer-oriented behavior.
Also, establishing employee feedback mechanisms so
that management can hear and take action on issues of concern will strengthen
employee perceptions of the company, increase satisfaction, and result in
better client interactions.
Ininventorability
/perishability
You cannot store services for future use. When a
client misses an appointment with his attorney, that time can never be
recaptured. When hotel rooms are empty and theater tickets go unsold, the
inherent value vanishes.
Perishability also affects performance, as
balancing supply and demand can be difficult. Demand may be seasonal, time
sensitive, or crisis driven. When demand fluctuates, it can be a challenge to
maintain high performance levels.
In it services, performance could be tested during
peak times of disaster recovery, massive server outages, or when juggling new
installation projects in four states. While product marketers handle
supply/demand issues through production scheduling and inventory management,
services marketers do not have that advantage.
The
marketing response:
Unlike the other three characteristics,
perishability primarily is a concern of the service producer. The client is
aware of this factor only when there is an insufficient supply and he has to
wait for the service. For the services marketing, perishability affects pricing
and distribution most distinctly.
If the services are particularly time sensitive,
demand-based pricing can be instituted as with airline tickets, seasonal
vacations, or even a partner's hourly fee structure. For many services,
managing demand is handled by scheduling delivery through appointments, while
increasing supply is addressed through multiple locations or additional site
personnel.
Another way to balance supply-demand issues is
through the use of retainer agreements. for those services that are long-term,
maintenance, or consultative in nature, this pricing and delivery method
ensures the client of ongoing services delivery with a greater consistency in
quality and allows the services producer to establish a more predictable cash flow
and forecasting scenario.
Understanding
the characteristics of services can provide a unique opportunity for services
producers to improve business success by rethinking their pricing models and
packaging options, improving production processes and client participation,
enhancing customer focus, and building employee relationship skills.
Perishability
refers to the fact that services cannot be saved, stored, resold or returned. A
seat on an airplane or in a restaurant, an hour of a lawyer’s time, or
telephone line capacity not used cannot be reclaimed and used or resold at a
later time. This is in contrast to goods that can be stored in inventory or
resold another day, or even returned if the consumer is unhappy.
Marketing implications
A
primary issue that marketers face in relation to service perishes ability is
the inability to inventory. Demand forecasting and creative planning for
capacity utilization are therefore important and challenging decision areas. The
fact that services cannot typically be returned or resold also implies a need
for strong recovery strategies when things do go wrong. For example, while a
bad haircut cannot be returned, the hairdresser can and should have strategies
for recovering the customer’s good will if and when such a problem occurs.
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