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17.11.2008 Business & Finance

Services Marketing In Perspective

Services are no longer a minor or superficial part of economies, but they go to the heart of value creation within the economy.

Services account for a large and growing proportion of economic activity.

 

Providers of medical and legal services, haircuts, day care, entertainment, and education, among others, will proliferate to meet the growing demands for leisure and spending which accompany a rising standard of living.

The primary objective of these service providers will be identical to that of all marketers — to develop and provide offerings that satisfy customer needs, thereby ensuring their own economic survival.

Despite some lingering belief that the service sector is an unsubstantiated and relatively inferior sector of the economy, considerable attention is now paid to its direct and indirect economic consequences.

Indeed, in one recent article which talked about the “service-centric” organisation, services were seen as the driving force behind all value creation in the economy, as suggested by Vargo and Lusch.

We shall soon appreciate the fact that services cover a vast array of different and often very complex activities.

 

 Rathmell defined services in broad terms as “acts, deeds, performances, or efforts” and argued that they had different characteristics from goods — defined as 'articles, devices, materials, objects, or things'.

Services, in their own right, ought to be defined not in relation to goods.

 

We can, for example, say that a service is something that can be bought and sold, but cannot be dropped on your foot, as once defined by The Economist.

 

 This may be amusing and memorable, but unfortunately, it is not particularly helpful as a guide to marketing strategy.

On a more serious note anyway, services can be defined as the production of an essentially intangible benefit, either in its own right or as a significant element of a tangible product, which through some exchange, satisfies an identified need.

This definition recognises that most products are, in fact, a combination of goods elements and services elements.

In some cases, the service element will be the essential element of the service (e.g. car rentals, insurance, hairdressing, barbering, etc.), while in other cases, the service will simply support the provision of a tangible good (e.g. a loan facility provided to support the sale of a new car).

In reality, services marketing are about refining the basic philosophy of marketing to allow the principles to be operationalised more effectively in the service sector.

Many of these principles will be familiar to those involved in the marketing of goods and can be applied to services with relatively little refinement.

 

In some cases, — such as the analysis of service encounters — a new area of marketing thought needs to be opened up.

Characteristics of services

Services have a number of distinctive characteristics that differentiate them from goods and have implications for the manner in which they are marketed.

 

These characteristics are intangibility, inseparability, variability, perishability, and the inability to own a service.

These characteristics of service have to be thoroughly understood, so that appropriate operations and marketing structures are created to be able to produce and sell services profitably.

Intangibility

A pure service cannot be assessed using any of the physical senses — it is an abstraction which cannot be directly examined before it is purchased.

A prospective purchaser of most goods is able to examine the goods for physical integrity, aesthetic appearance, taste, smell, etc., but he cannot make a thorough evaluation of a service.

 

Services cannot be evaluated as such, so they must be transformed to concrete offerings, which can be evaluated and compared to those of the competitors.

If the firm does not manage this process, the customers will, in an unguided manner, pick out tangible attributes, which are the service in the customers' mind.

The service provider, therefore, has to use tangible cues to indicate service quality.

 

A holiday firm may show pictures of holiday destinations, display testimonials from satisfied holiday makers and provide details of the kind of entertainment available.

 

A restaurant may thus convey quality by creating a great ambience, a clean kitchen, well-dressed and well-mannered staff, good table layout and great smelling food to convey quality.

Cues have to be provided by all service organisations to provide customers an opportunity to judge the quality of the service offerings before purchase.

Inseparability

The production and consumption of a tangible good are two discrete activities. Services cannot be separated from the producer, and the producer and the seller are the same organisation.

A service is considered to be consumed as it is produced. Thus, producing and marketing are very interactive processes.

 

Both activities are also simultaneously performed by the same persons in a service company.

Companies usually produce goods in one central location and then transport them to the place where customers most want to buy them.

 

In this way, manufacturing companies can achieve economies of scale through centralised production and have centralised quality control checks.

Services, however, involve simultaneous production and consumption. The service provider is an important part of the service and is an integral part of satisfaction gained by the customer.

Kumar and Meenakshi posit that the way service providers conduct themselves will have a crucial bearing on repeat business over and above the technical efficiency of the service task.

In consumers' eyes, the provider, like the insurance representative or the doctor, is the company.

 

 Selection, training and rewarding front-line staff is vitally important in the achievement of service quality.

Variability

Standardisation is difficult in the provision of services. Services are conducted at multiple locations by people who vary in their skills and attitudes and are subject to simultaneous production and consumption.

A service fault, like rudeness, cannot be quality checked and corrected between production and consumption, unlike a physical product.

 

The potential for variability in service quality emphasises the need for rigorous selection, training and rewarding of staff in service firms.

Training should emphasise the standards of behaviour expected of personnel when dealing with customers.

 

Evaluation systems should be developed, which will allow customers to report their experiences with staff.

Perishability

This describes the real time nature of the product. Services cannot be stored, unlike goods and the absence of the ability to build and maintain stocks of the product means that fluctuations in demand cannot be accommodated in the same way as goods i.e. in periods of excess demand, more products cannot be utilised.

 

For the purchaser of services, the time at which he/she chooses to use the service may be critical to its performance and, therefore, to the customers' experience.

Kelly, et al. make an observation that consumption is inextricably linked to the presence of other consumers and their presence can influence the service outcome.

Ownership

The inability to own a service is related to the features of intangibility and perishability.

In purchasing goods, buyers generally acquire title to the goods in question and can subsequently do as they wish with them.

 

On the other hand, when a service is performed, no ownership is transferred from the seller to the buyer.

The buyer is merely buying the right to a service process, such as the use of a car park or a solicitor's time.

Also, in the case of a service, the purchaser only has temporary access or use of it — what is owned is rather the benefit of the service, not the service itself e.g. in terms of a holiday, the purchaser has the benefit of the flight, hotel and beach, but does not own them.

Interconnections

According to Palmer, in practice, it can be extremely difficult to distinguish services from goods, for when a good is purchased, there is nearly always an element of service included.

Similarly, a service is frequently augmented by a tangible product attached to the service.

 

On the other hand, a seemingly intangible service, such as package holiday includes tangible elements in the purchase — use of an aeroplane, the hotel room and transfer player, for instance.

 

In between them is a wide range of products which are a combination of tangible good and intangible service.

 

A meal in a restaurant is a combination of tangible goods (the food and physical surroundings) and intangible service (the preparation and delivery of the food, reservation service, etc.).

Article by Bala Sa-ad

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