An Introduction to

Services
What is a Service?

Services: deeds, efforts, or performances

Goods: objects, devices, or things

The distinction between goods and

services is not perfectly clear.
Figure 1.1: Scale of Market Entities
Difference between physical
goods and services
Physical goods Services

tangible intangible

homogeneous heterogeneous

Production and distribution are Production, distribution and

separated from consumption consumption are simultaneous
processes
A thing An activity or process

Core value processed in factory Core value produced in the buyer-seller

interaction
Customers do not participate in the Customers participate in production
production process
Can be kept in stock Cannot be kept in stock

Transfer of ownership No transfer of ownership

Examples of Service
Businesses :
• Airline
• Courier
• Hotel
• Restaurant
• Beauty Saloon
• Theme Park
• Marketing Research
• Advertising
• Consultancy
• Education
• Legal Services
• Medical Services
• Retailing
• Maintenance & Repair
• IT
• R&D
• Product Design
• Banking
• Investment advising
• Accounting & Tax
Characteristics of services
• Intangibility
• Inseparability
• Perishability
• Variability
The three additional ‘P’s of
Service Marketing
• People
• Physical evidence
• Process
The Service Experience
• Moments of Truth :
• CEO of Scandinavian Airlines Jan
Carlzon
• Servuction Model :
• Bateson – 2 components
• Visible and the invisible
• Service Theatre :
• This aspect implies the experience of
service planning, design and delivery to
that of a theatrical performance
• Script
• Service Theatre :
• This aspect implies the experience of
service planning, design and delivery to
that of a theatrical performance
• Script
Classifying Services:
• The degree of tangibility of the service
• Whether the service is directed at the
customer or his possessions
• The time and place of service delivery
• Level of customization versus
standardization
• Formal or informal relationship with
customers
• Extent to which demand and supply
fluctuate
• Interaction with people or inanimate
objects/environment
Molecular Model
What is benefit concept?

• Benefit concept: Encapsulation of

benefits in the consumer’s mind

• Tide’s core benefit concept

– Might simply be Cleaning or
• Cleanliness
• Whiteness
• Motherhood
What is the Servuction model?

(visible)
Servicescape

Servuction
Servuction Model
Model Contact personnel
AA framework
framework Service providers
for
for understanding
understanding
the
the consumer’s
consumer’s Other customers
experience
experience
(invisible)
Organization and
systems
The Servuction Model

Inanimate Customer A
Environment
Invisible
organization Contact
and systems Personnel
Or
Service Customer B
Provider

Invisible Visible
Bundle of
service
benefits
received
by Customer A
The Service Revolution
Industrial Market-focused
Management model: Management model:
an approach to a new organizational
organizing a firm that model that focuses on
focuses on revenues the components of the
and operating costs and firm that facilitate the
ignores the role firm’s service delivery
personnel play system.
ingenerating customer
satisfaction and
sustainable profits.
Industrial Management Model
• Sales Revenues are a function of:
– Location Strategies
– Sales Promotions
– Advertising
• Labor and operating costs should be
kept as low as possible
• Places a higher value on upper and
middle managers
• Replaces full-time personnel with part-
time personnel to reduce costs
©2006 Thomson Learning, Inc. South-Western
Industrial Management Model
Consequences
• Produce dead-end front-line jobs, poor
pay, superficial training, no
opportunity for advancement, if any,
access to company benefits.

• Can lead to customer dissatisfaction,

flat or declining sales revenues, high
employee turnover, little service
productivity.
 The Services Triangle
The •The organization
•The company service exists to serve
exists to serve strategy the needs of the
the customer people who serve
the customer

The
customer

The The
systems people
 Six Key Relationships
1. Communicate the 4. Impact of
service strategy to the organizational systems
customer (Firm’s commitment upon customers
to excellence)

2. Communicate the 5. Importance of

service strategy to the organizational systems
employees (Good service and employee efforts
starts at the Top)
6. The customer/service
3. Consistency of the provider interaction
service strategy to run (Critical incidents or “moments of
the day-to-day truth”)

operations
Market-Focused Management
Model
• Recognizes that employee turnover and
customer satisfaction are clearly
related.

• Employs more full-time employees.

• Attempts to utilize innovative data to

examine the firm’s performance by
looking beyond generally accepted
accounting principles.