Characteristics Of Service | Chapter 2
Lessons from the book services marketing
Services are a special form of product which consists of activities, benefits or satisfactions offered for sale that are intangible and do not result in the ownership of anything. Without doubt, services have grown dramatically in recent years, and are growing quickly in the world economy, becoming more and more important
These characteristics of services can be arranged on a continuum similar to the tangibility spectrum. That is, services tend to be more heterogeneous, more intangible and more difficult to evaluate than goods, but the differences between goods and services are not black and white by any means
Table Of Contents
- Intangibility
- Heterogeneity
- Simultaneous Product and Consumption
- Perishability
- Search, Experience and Credence Quality
- Service Marketing Mix
6.1 Traditional Marketing Mix
6.2 Expanded Mix for Services - Staying focused on the customers
- Summary
1. Intangibility
The most basic distinguishing characteristic of service in intangibility. Because service are performance or actions rather than objects, they cannot be seen, felt, tasted, or touched in the same manner that you can sense tangible good.
For example health care service are actions performed by providers and directed towards patients and their families. These services cannot be seen or touched by the patient, although the patient maybe able to see and touch certain components of the service
Resulting Marketing Impact, Intangibility presents several marketing challenges. Services cannot be inventoried and therefore fluctuations in demand are often difficult to manage.
2. Heterogeneity
Because services are performances, frequently produced by humans, no two services will be precisely alike. The employees delivering the service frequently are the service in the customer’s eye, and people may differ in their performance day to day. Heterogeneity occurs in the case of customers no two customers are the same.
Resulting Marketing Impact, Because service often are produced and consumed at the same time, mass production is difficult. The quality of service and customer satisfaction will be highly dependent on what happens in “real time,” including actions of employees, the interactions between employees and customers, the interactions between employee and customers, and interactions among customers themselves.
3. Simultaneous Product and Consumption
This is very different from a manufacturing situation. In most manufacturing operations, there are inventories between each stage of production, and a finished goods inventory which can be increased or decreased as demand fluctuates.
Take, for example, a production process that involves three stages. We start with our raw materials and begin our production process. When we get to the end of stage one we have semi-finished goods that go into an inventory.
We would then do more production of these semi-finished goods (or sub-assemblies). At the end of this stage, they would become finished goods and would go into the finished goods inventory. They would then go to a retail inventory, onto a shelf in a retail outlet, and finally to the consumer. The semi-processed and finished goods might be in inventories for a considerable amount of time (in most operations — one aspect of Lean is to minimize Inventory). There would be a considerable lag between the time the product was produced and the time it was consumed.
In a Service operation, there are no lags as there are in Manufacturing. Indeed, there is almost a co-creation of the product between the manufacturer and the customer.
4. Perishability
Perishability is used in marketing to describe the way in which a service capacity cannot be stored for sale in the future. Services cannot be stored, saved, returned, or resold once they have been used. Once rendered to a customer, the service is completely consumed and cannot be delivered to another customer.
Resulting Marketing Impact, A primary issue that marketers face in relation to service perishability is the inability to inventory. Demand forecasting and creative planning for capacity utilization are therefor important and challenging decision areas.
5. Search, Experience and Credence Qualities
One framework for isolating differences in evaluation process between goods and services is a classification of properties of offering proposed by economists. Economists first distinguished between two category of properties of products: search qualities, attribute that a customer can determine before purchasing a product, and experience qualities, attributes that can be discerned only after purchase or during consumption.
6. Service Marketing Mix
The marketing mix concept gained popularity following an article titled “The Concept of the Marketing Mix” by Neil Borden published in 1964. Borden explained how he started using the term inspired by James Culliton who in the 1940s described the marketing manager as a ‘mixer of ingredients.’ Borden’s article detailed these ingredients as product, planning, price, branding, distribution, display, packaging, advertising, promotions, personal selling among many others. Eventually E. Jerome McCarthy clustered these multiple items into four high level categories that we now know as the 4 P’s of marketing. “Its elements are the basic, tactical components of a marketing plan”. Together, elements in these four categories help develop marketing strategies and tactics.
6.1 Traditional Marketing Mix
The product marketing mix consists of the 4 P’s which are Product, Pricing, Promotions and Placement.
- Product: The product is either a tangible good or an intangible service that is seem to meet a specific customer need or demand. All products follow a logical product life cycle and it is vital for marketers to understand and plan for the various stages and their unique challenges. It is key to understand those problems that the product is attempting to solve. The benefits offered by the product and all its features need to be understood and the unique selling proposition of the product need to be studied. In addition, the potential buyers of the product need to be identified and understood.
- Price: Price covers the actual amount the end user is expected to pay for a product. How a product is priced will directly affect how it sells. This is linked to what the perceived value of the product is to the customer rather than an objective costing of the product on offer. If a product is priced higher or lower than its perceived value, then it will not sell. This is why it is imperative to understand how a customer sees what you are selling. If there is a positive customer value, than a product may be successfully priced higher than its objective monetary value. Conversely, if a product has little value in the eyes of the consumer, then it may need to be underpriced to sell. Price may also be affected by distribution plans, value chain costs and markups and how competitors price a rival product.
- Promotion: The marketing communication strategies and techniques all fall under the promotion heading. These may include advertising, sales promotions, special offers and public relations. Whatever the channel used, it is necessary for it to be suitable for the product, the price and the end user it is being marketed to. It is important to differentiate between marketing and promotion. Promotion is just the communication aspect of the entire marketing function.
- Place: Place or placement has to do with how the product will be provided to the customer. Distribution is a key element of placement. The placement strategy will help assess what channel is the most suited to a product. How a product is accessed by the end user also needs to compliment the rest of the product strategy.
6.2 Expanded Mix for Services
The service marketing mix is also known as an extended marketing mix and is an integral part of a service blueprint design. The service marketing mix consists of 7 P’s as compared to the 4 P’s of a product marketing mix. Simply said, the service marketing mix assumes the service as a product itself. However it adds 3 more P’s which are required for optimum service delivery.
The extended service marketing mix places 3 further P’s which include People, Process and Physical evidence. All of these factors are necessary for optimum service delivery. Let us discuss the same in further detail.
- People: People is one of the elements of service marketing mix. People define a service. If you have an IT company, your software engineers define you. If you have a restaurant, your chef and service staff defines you. If you are into banking, employees in your branch and their behavior towards customers defines you. In case of service marketing, people can make or break an organization.
- Process: Service process is the way in which a service is delivered to the end customer. Lets take the example of two very good companies — Mcdonalds and Fedex. Both the companies thrive on their quick service and the reason they can do that is their confidence on their processes.
- Physical Evidence: The last element in the service marketing mix is a very important element. As said before, services are intangible in nature. However, to create a better customer experience tangible elements are also delivered with the service. Take an example of a restaurant which has only chairs and tables and good food, or a restaurant which has ambient lighting, nice music along with good seating arrangement and this also serves good food. Which one will you prefer? The one with the nice ambience. That’s physical evidence.
7. Staying focused on the customers
Customer service is a series of activities designed to deliver customer satisfaction. The process of providing customer satisfaction is based on an understanding of what customers want and need.
Effective businesses aim to anticipate and meet or exceed these needs. It also requires effective communication. A high quality customer experience needs to apply from initial contact through to after-sales care, whether the customer generates a one-off transaction or regular repeat business
There are many great companies that are considered “rock stars” in customer service, regularly winning awards and accolades — Amazon, Apple, Nordstrom, Southwest Airlines and Zappos, for example.
8. Summary
We learn about the future of services marketing by presenting information on changes in world economy and business practice that have driven the focus on service.
