Lecture 05 Classification of Services

8/13/2019 Lecture 05 Classification of Services

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CLASSIFICATION OF SERVICES. (FRAMWORKS FOR ANALYSIS OF SERVICES).

Problem: narrow exposure of managers to the variety of service industries; managers perceive their

service as unique; management personnel is usually inbred; as a result, marketing thought in the

field of services is underdeveloped.

E.g., hoteliers often spend their whole life in the industry or even one company, most airlinemanagers have grown up in the commercial aviation industry, bankers and hospital administrators

usually work within the confines of banking and health care, respectively.

anagers from manufacturing sector find themselves unprepared to deal with servicing problems.

!ervices are neither a homogeneous group, nor different in"between according to industry

classification. !ervices can be segmented into clusters that share certain marketing"relevant

characteristics.

Classifications.

#mport from tangible products domain:- $opeland%s convenience, shopping, specialty goods. &'etail service institutions can also use this

approach; e.g., from financial services providers to restaurants(.

- )urability. &*or services: durability of benefits is relevant to repurchase frequency(.

- $onsumer+industrial. &)ifferent evaluation of competing alternatives, purchasing procedures

and usage behavior is also transferable to services(.

perations approach to classification: every service is different &insisting that airlines% marketing

has nothing to do with banks, insurance, motels, etc.(.

-owever, marketing views demonstrate a lot of similarities in sharply different services; valid

classification highlights implications for managers concepts and strategies can be shared betweenindustries.

$lassification will have managerial value if it offers strategic insight i.e. implications for

managers. /his includes both the core and supplementary services.

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)ifferent types of processes result in different levels of customer involvement.

#f services are 9deeds, acts, or performances, two questions arise:- at whom &or what( is the activity directed;

- is the activity tangible or intangible.

5hat is the nature of the

service act8

5ho or what is the direct recipient of the service8

People Possessions

/angible actions #. !ervice directed at people%s bodies:

- passenger transportation;

- health care;

- lodging;

- beauty saloons;

- physical therapy;

-fitness centers;

- restaurants;

- haircutting;

##. !ervices directed at physical possessions:

- freight transportation;

- repair and maintenance;

- warehousing+storage;

- anitorial services;

- retail distribution;

-laundry and dry cleaning;

- refueling;

- landscaping+lawncare;

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- funeral services - disposal+recycling.

#ntangible actions ###. !ervices directed and people%s minds:

- adverti>ing+P';

- arts and entertainment;

- broadcasting+cable;

- management consulting;

- education;

-information services;

- concerts;

- psychotherapy;

- religion;

- voice telephone.

#4. !ervices directed at intangible assets:

- accounting;

- banking;

- data processing;

- data transmission;

- insurance;

-legal services;

- programming;

- research;

- securities investment;

- software consulting.

#. People processing.

anagers should think about the process and output in terms of what happens to the customer &or

other obect process( to identify what benefits are being created.

'eflecting on the service process itself helps to identify some of the non"financial costs time,

mental and physical effort, and even fear and pain that customers incur in obtaining the services.

$ritical factors:- moving to the 9service factory &or service people going to clients(;

- getting into contact and cooperation;

##. Possession processing.

*requently quasi"manufacturing operations.

/he services are the entire chain of activities that may take place during the lifetime of the obect in

question.

'eceivers are not necessary to be present.

###. ental stimulus processing.

!trong ethical standards and careful oversight may be required.

'eceivers% physical presence is not necessary, but communication+participation is required.

#4. #nformation processing.

$ustomer involvement is determined by traditions and personal desire; operationally it is not

required.

#nsights and implications.

/he model helps answering a question 9what business are we in8 and formulating the benefits

provided by services to the users.

$ustomer satisfaction is influenced by:- encounters with service personnel;

- appearance and features of service facilities both exterior and interior;

- interactions with self"service equipment;

- characteristics and behavior of other customers.

0dvancement of telecommunication forms a uniform channel for informational"type services

delivery " internet.

/rend is the move from 9high"contact service into a 9low"contact with offering customers greater

convenience.

-5 #! /-E !E'4#$E )E?#4E'E)8#ssues:

- the current method of delivery and

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- the number of distribution sites.

Aey question: does the firm currently require customers to be in direct physical contact with

personnel, equipment, and facilities8

#f the firm does require direct physical contact, do customers have to visit the facilities of the

service organi>ation or will the latter send personnel and equipment to customer%s own sites8

0lternatively, can transactions between provider and customer be completed at arm%s length8

0nother issue: distribution does the company require one or multiple distribution sites8

3ature of interaction b+w

customer and serviceorgani>ation

0vailability of service outlets

!ingle site ultiple sites

$ustomer goes to serviceorgani>ation

- /heater;

- Barbershop.

- Bus service;

- *ast"food chain.

!ervice organi>ationcomes to customer

- ?awncare service;

- Pest control service;

- /axi

- ail delivery;

- 0uto club road service.

$ustomer and serviceorgani>ation transact at

arm%s length &mail orthrough #nternet(

- $redit card company;

- ?ocal /4 station.

- Broadcast network;

- /elephone company.


-ow and where service is delivered forms the basis of distribution strategy. #t also affects the nature

of customers% service experiences including the encounters they have with specific service

personnel and impacts the cost they incur in obtaining service.

$ombination of facilities, equipment and personnel generate value and costs.

Aey issues: convenience; costs involved in travel; appeal of the retail facilities relative to competing

alternatives.ostly, companies require customers to visit the 9factory. -owever, niches of premium customers

should be considered, who agree to pay for the servicemen visit.

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Empty seats in an airplane or rooms in a hotel are lost forever if unoccupied.

Productive capacity of an auto repair shop is wasted if no one brings a car.

$onversely, when demand for service exceeds supply, the excess business may be lost.

-owever, demand and supply imbalances are not found in all service situations.

Extent to which supply is

constrained

Extent of demand fluctuations over time5ide 3arrow

Peak demand can usually

be met w+o a maor delay- Electricity;

- 3atural gas;

- /elephone;

- -ospital maternity unit;

- Police and fire emergencies

- #nsurance;

- ?egal services;

- Banking;

- ?aundry and dry cleaning.

Peak demand regularly

exceeds capacity- 0ccounting and tax preparation;

- Passenger transportation;

- -otels+motels;

- 'estaurants;

-/heaters.

&!ervices, similar to those in cell above, but

which have insufficient capacity for theirbase level of business(.


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anaging demand is the maor challenge for many service marketers, especially in people"

processing and possession"processing services when opportunities to manage the level of physical

capacity &facilities or personnel( are tightly constrained.

Duestions, managers should answer:

0re demand fluctuations cyclical, what is the cycle period8

5hat are the underlying causes of fluctuations8

)o fluctuations reflect customer habits that can be changed by marketing8 r are they formed by Cdparties &working or classroom hours(8 r random events8

!moothing demand is done through marketing strategies that affect customer behavior or queuing

system &which inventories demand rather than supply(. 'eservation system can also be

implemented. &5hat other implementations are possible to smooth demand8(.

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Equipment" or people"based, or both.

/he parameters are rather continuous.


/he greater the degree of physical involvement by the customer in the service process, the more

likely service personnel, equipment, and facilities are to form an important part of the service

experience.

$ustomers may choose suppliers by the appraisal of these elements and evaluation of the output.

anagers may get insights from other service businesses with similar facilities+people emphasis.

&E.g. hospitals may import from hotels, public accounting firm management consulting company(.

-owever, marketing strategies used by one type of service in an industry may not be generali>able

to other services offered by that same industry &e.g. conventional and electronic banking, hotels and

motels(.

People based services are harder to manage than equipment"based &in general(.

1eneral trend switch to self"service &in what industries8(.

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$ontinuous relationship or discreet transaction8

3ature of service delivery

/ype of relationship between the service organi>ation and its customers

embership relationship 3o formal relationship$ontinuous delivery of

service- #nsurance;

- $able /4 subscription;

- $ollege enrollment;

- Banking

- 'adio station;

- Police protection;

- ?ighthouse;

- Public highway.

)iscrete transactions - ?ong"distance calls;

- /heater series subscription;

- /ravel on commuter ticket;

- 'epair under warranty;

- -ealth treatment for - member.

- $ar rental;

- ail service;

- /oll highway;

- Pay phone;

- ovie theater;

- Public transportation;

- 'estaurant.


0dvantage of membership relationships is that it knows who its current customers are and, usually,

what use they make of the services offered.

Pricing also is 9easier with membership relationship through periodic &monthly( fees.

-owever, multiple transaction payments may seem more fair.

$ontinuous delivery is typical only for 9public goods.

)iscrete transactions make customers 9anonymous what makes marketing harder, since suppliers

are less informed about who their customers are and what use each customer makes of the service.

#n general, businesses tend to create formal on"going relationships with customers. &5hy8

Examples8(

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#n contrast to 9tangible world, services are frequently custom made.

$ustomi>ation can proceed at least at two dimensions:

- how much the characteristics of the service and its delivery system lend themselves to

customi>ation and

- how much udgment customer"contact personnel are able to exercise in defining the nature of

the service received by individual customers.

Extent to which customer"

contact personnel exerciseudgment in meeting

individual customer needs

Extent to which service characteristics are customi>ed

-igh ?ow

-igh - ?egal services;

- -ealth care+surgery;

- 0rchitectural design;

- 'eal estate agency;

- /axi service;

- Beautician;

- Plumber;

- Education &tutorials(.

- Education &large classes(;

- Preventive health programs.

?ow -

/elephone service;

- -otel services;

- 'etail banking &excluding maor

-Public transportation;

- 'outine appliance repair;

- *ast"food restaurant;

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loans(;

- 1ood restaurant.

- ovie theater;

- !pectator sports.


$ustomi>ation has its costs.

$onstant struggle b+w marketing &add value( and operations &reduce costs through standardi>ation(.

$ustomi>ation is not necessarily important to success.!tandardi>ed services tend to imitate customi>ation &naming clients in hotels, morning calls, etc(.

#n general, customers like to get expected results.

#n first quadrant, providers% role is first diagnosing the nature of the situation and then designing a

solution. #n this case neither provider nor receiver have clear vision what the result will be.

)ividing the service in to diagnosis and implementation can be the options.

/rial encounters can also remedy the uncertainty to some degree.

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)uration of benefits. #mplications relationships with clients &random vs. long"lasting ties(.)uration of service delivery. &/elephone call vs. college(. ?onger services make more likely longer

relationships with supplementary services.

&7our service classification ideas8(

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Lecture 05 Classification of Services

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