Majority of the economic activities are now accounted as services, especially in most industrialized countries. Both academics and practitioners have turned their attention to the increasingly important services markets, the question has been debated, “How different actually are services?”
When we try to evaluate them (services and products), we can see that there is not such a clear-cut line between services and products as might be thought. We have seen many products in fact include large elements of service in their delivery. From the buyer’s point of view, services may form a vital part of the total bundle of benefits which is sought, particularly in industrial markets.
There are many services that include a large contribution from hardware: hotels, airlines, fast food outlets are all classified as services, but the physical elements in the offering area are very large part of what customers buy. What is different is that as buyers we do not receive ownership at the physical elements of a service, but merely rent them for a period of time. Otherwise, it seems that there is a spectrum of product-service offerings, in which the physical element plays a decreasing role from one end to the other.
It is one of the ways in which services can be classified. Classification is a helpful approach, since the range of services is so wide that generalizations about them may become vague. Many classification schemes have been put forward. One of the more useful is based on the following questions:
- What is the nature of the services act?
- What type of the relationship does the service organization have with its customers?
- How much room is there for customization and judgment on the part of the service provider?
- What is the nature of demand and supply for the service?
- How is the service delivered?
Lovelock (1983), sets up a matrix to classify services, and draws insights for marketing, as can be gleaned from Figure 1.
If customers have to be personally present for the delivery of the service, location and convenience become important, and the physical surroundings play a large part. If the transaction is at arm’s length, the “factory” is never seen by the customer, and only its efficiency in delivering output is important. This and all the classification schemes help to focus executives’ minds on the nature of the process; they may help to pinpoint areas of dissatisfaction and guide the search for improvements.
Figure 1. Understanding the nature of the Service Act
| Who or what is the direct recipient of the services? | ||
| People | Things | |
What is the nature of the service act? Tangible Actions | Service directed at people's bodies:
| Services directed at goods and other Physical possessions:
|
Intangible Actions
| Services directed people's minds:
| Services directed at intangible assets:
|
Characteristics of Services
The main characteristics of services are:
- Intangibility
- Inseparability
- Heterogeneity
- Perishability
Intangibility
Intangibility is relevant only to the pure service element; the hotel bed and the hamburger are very tangible. The problem of intangibility is that it is hard to communicate and display exactly what the product is.
Inseparability
This refers to the fact that production and consumption of the service are that the consumer is involved in production. Further, in many cases other consumer is involved in production. Further, in many cases other consumers are also involved at the same time, as in most retailing situations. These may be a positive aspect of the benefits delivered (in a theatre or club), or it may be a potential negative aspect (waiting in queues at the toll gate). Whether the buyer is physically present or not, the product comes into existence only when it is bought; it cannot be mass produced in advanced.
Heterogeneity
Heterogeneity, or to use preferable term, variability, is a result of the fact services are usually delivered by human being, whose performance is necessarily variable; quality control is extremely difficult.
Perishability
This means that the service cannot be stockpiled. If aseat is unfilled when the plane leaves or play starts, it cannot be kept and sold the next day or next week; that revenue is lost forever. In some cases, such as insurance or banking, it could be argued that potential stocks remain, in the sense that the service is there to be sold everyday as long as underwriting or loan capacity exists. Retailers can keep stocks of products for the duration of their shelf-life, a day for fresh produce, several months for clothes, longer still for furniture. Most time-dependent in a way that physical product are not.
Implications For Marketing
Intangibility and Variability
It is not easy to measure exactly what people want from a physical product, and what benefits they gain from it, at least the physical product itself can be seen, felt, used. We know that quality control in the factory can ensure that within very narrow limits the product will always be the same, and that a bar of soap bought in one shop will be the same as one bought in another shop at a different time in a completely different part of the country. That is not true for what has been called “the service experience”, however, since very experience is different.
One very logical answer is to try to industrialize the service, as advanced by Levitt (1972). There are some very good examples of this approach, notably the McDonalds and Jolibee hamburger chains. All hardware and materials can be standardized, as can the processes of production. Policies and rules can be set down for every action taken by the personnel in delivering the service, and performance measurescan be used to control quality.
Thus, according to Randall (1993), “Where service operations can be standardized, this approach can lead to great efficiencies as well as to control over variability.”
Many service organizations will react against the concept, sometimes seeing it as the negation of the very idea of service. The opposite extreme is customization-producing a different service for every customer. Some professional companies such as lawyers would claim the offer this, but even they have some aspects of service which can be standardized, as the entry of new competitors into the conveying market has shown.
Many of the service providers could probably industrialize at least part of their operations, to the benefit of both themselves and their customers. This raises the question which will always be central to the delivery of services: how do you standardize what the staff do, while leaving them pride and responsibility in the job, as stated by Randall.
The focus of most organizational development is toward giving individuals greater responsibility and control over their job-empowering them, to use the jargon. The drive of operations is towards greater efficiency and effectiveness, while the marketing department may be trying to ensure standardization and quality control of the basic elements of the service, while allowing individual freedom to go beyond what is expected, to try to “delight” the customer (the latest idea being that is not enough in this highly competitive world to satisfy customers, we must delight them). Some advertising for international hotel chains which uses examples of how staff went beyond the call of duty of help a client show this approach.
This leads on two other connected issues: how to communicate the benefits of your service brand, and the expectations gap.
Communicating the Brand Benefits
As with any brand, the main effort must be in search for a real point of difference which will motivate buyers, which you can deliver, and which is difficult for your competitor’s to copy. Almost everything in a service offering can be copied, as an idea cannot be patented; the very rapid spread of “air miles” as a promotion to build loyalty is a good example. A pre-emptive claim, established in the minds of the target market, my work for some time at least, even if competitors can also deliver that benefit.
It is suggested that personal experience and word-of-mouth are even more influential in services than in physical product purchasing. This would lead to attempts to stimulate word-of-mouth (“Tell your friends”), and to the use in advertising of real or stimulated recommendation.
The messages we receive as customers from an organization embrace all the communications: not just advertising, but the information contained in staff appearance and behaviour, and in the hardware – the premises, the décor. The cleanliness, the logo, the packaging and so on. That in turn leads on to the expectations gap.
The Expectation Gap
It must be noted, that it is dangerous with any product to arouse expectations which experience of the product fails to fulfill. Given the variability in service quality, that danger is all the greater.
There are five expectations gaps according to Parasuraman et.al. (1985):
| Consumer expectation | Gap 1 |
| Management perception of consumer expectation | Gap 2 |
| Translation of perception of service quality specification | Gap 3 |
| Service delivery | Gap 4 |
| External communications to consumers | Gap 5 |
Expected service
The potential for a wide gap to have opened up by the end of the line is very great. The more the staff designing marketing campaigns and advertising are divorced from the actual deliver of the service, the greater the danger shall be.
Therefore, all marketing campaigns and communications must be consistent with reality. However, they may use emotional imagery as well as rational product differences, as long as the experience of the service matches the promise. The more tangible and measurable the promise can be made, the better.
Other Elements of the Marketing Mix
Pricing
There are service providers who are cost-plus approach; At least, this ensures that all costs are covered. Parity with competitors or positioning in relation to them is another obvious way and again seems to be widely used. Where the services are very similar to those of competitors, the some parity must be expected. The difficulty comes when there are differences between the product offerings. Consumers may not be able to explain their judgment of the relative value of different services and service levels; sometimes only experimenting will give an answer, and that can be dangerous if too high a price is chosen. This is an area in which considerable further study is needed.
Distribution
As far as distribution is concerned, this may or may not be an issue in marketing services. However, where there are outlets, they are very important. They should be efficient, but they must be also beconsistent with the overall product and its desired image. It will be interesting to see, for example, if the new-style banks with open, modern layouts and décor affect consumers’ perceptions of the service offered. Given the cost of retail outlets and staff, it is worth examining the extent to which some or all the services could be delivered another way-by post, telephone, computer or cell phone, for example. The banking industry seems to use the first to avail this kind of approach, putting the marketing concept into practice by targeting a particular segment with a specific set of benefits by using ICT facilities.
Positioning
Actually, there are seems no reason why services cannot be positioned within a market just like physical products. Thus, we can safely conclude that there are some crucial differences between the marketing of products and of services, but that the same basic principles apply. Service providers must still strive to understand their customers and consumers, and to develop what they want better than competitors can. The elements of the mix are used in much the same way, and they must still be consistent, coherent, and targeted at the chosen segment.
