SERVICES MANAGEMENT

DEFINITIONS

 A service is an act or performance offered by one party to another. The

performance is essentially intangible and does not result in ownership of any
factors of production

 Services are economic activities that create value and provide benefits for
customers at specific times and places bringing about a desired change in or on
behalf of the recipient of the services

A service is a set of singular and perishable benefits

• delivered from the accountable service provider, mostly in close coactions with his service suppliers,
• generated by functions of technical systems and/or by distinct activities of individuals, respectively,
• commissioned according to the needs of his service consumers by the service customer from the
accountable service provider,
• rendered individually to an authorized service consumer at his/her dedicated request,
• And, finally, consumed and utilized by the requesting service consumer for executing and/or supporting
his/her day-to-day business tasks or private activities.

A service is the non-material equivalent of a good. Service provision has been defined as an economic activity
that does not result in ownership and is claimed to be a process that creates benefits by facilitating either a
change in customers, a change in their physical possessions, or a change in their intangible assets.

Meaning

Service plays an important role in every national’s economy and country economy
always depends on service infrastructure like transportation, communication, education
and government services. In today's economy, you don't have to produce anything to get
rich not have to employ anybody. Now day’s money rests on bigger markets and more
ways to make money. Having a name, a status, an idea can be sufficient. E. g.
entertainment and sports figures make money by bringing people happiness.

A service is a financial activity that is basically intangible and does not result in the
ownership of anything. Service can not be owned by anyone, The American economy is
quickly becoming service leaning. According to the Monthly Labor Review Online,
after Second World War factory jobs declined in figure, while service-based
employment increased. And it is increasing with rapid growth. Difference between
services and manufacturing processes comprises the nature of outputs and the primary
production processes, which are closely related. Service inputs include the facility
where the service is provided, any products that are essential in providing the service.
Even product-based organizations must give and manage a service package for their
clientele. The bunch of services might include pre-sale services such as technical
advice and dependable delivery, as well as post-sale services such as prompt repair and
training. Not like most products, services are intangible, inseparable, variable and
perishable.
 • Intangibility: Cannot be seen, felt, tasted, smelt or heard before being
purchased
• Challenge: Making the intangible, tangible

• Inseparability: reflects the interconnection between the service provider,

customer receiving the service and customers sharing the service experience
• Challenge: Increase productivity of providers who are inseparable from the
product

• Heterogeneity: Services delivered vary in quality, time consumed in

delivery and the extent of service provided
• Challenge: Standardise quality in the face of variability

• Perishability: The services cannot be stored

• Challenge: Influence demand movements and supply capacities better to
overcome service perishability

Service Characteristics
Intangibility of service: Service cannot be defined as physical attributes because it
cannot be seen, tasted, felt, heard, touched or smelled before it is bought, so it is
difficult for consumers to tell in advance what they will be getting. (Sheila Webber,
2001) The experience consumers obtain from the service has an impact on how they
will perceive it. And perceived service is risky and difficult to evaluate, customer tend
to rely more on personal references, reputation, facilities of the service provider as an
indication of quality. Service marketers identify the feelings that they want the
customer to experience as a result of the service. They stress the positive elements of
tangibility in the service, make all communications with the customer very clear and
focus constantly on service quality. For example when anybody buys a car, he/she takes
it to test drive, if they like it than only pay and buy the car ,never pay for test drive. But
if you buy a meal at a restaurant, you do not know what is going to serve. Now buyers
only look at tangible evidence like cleanliness, decoration, staff movement, which
provide the information of quality of intangible service. (Kotler et al. 1996, 61)
Inseparability of service: Services cannot be separated from the service supplier. It is
labour intensive. After it is sold, the customer can not be taken away from the producer
it is simultaneously produced and consumed. It is being produced at the same time that
the customer is receiving. So customer is also part of the product. For example in a
restaurant, you order your meal, during the time of waiting and delivery of the meal, the
service provided by the service provider is all part of the service production process and
is inseparable, the staff in a restaurant are as part of the process as well as the quality of
food provided.

Perishability of service: a characteristic of services unused capacity cannot be stored or

saved for future sale or use, it perishes after a specific time. (Sheila Webber, 2001) For
example a 200 room hotel that only sells about 160 rooms for particular night. It can not
inventory the remaining 40 rooms and sell them next night; revenue lost from these 40
unsold rooms is gone forever, because of perishable character of service. same in a play
ground or airlines, where if a match is held today and few seats are not sold lets take
because of less popular team are playing these seats can not be sold in next match. And
in airlines also for a destination all seats are not sold, revenue will be gone once journey
over, so if these seats were sold even at low price some revenue could have earn. Thus
service is perishable; it perishes if it is not used at particular time.

Heterogeneity or variability of service: It is very difficult to make each service

experience identical, since services are not produced by a single entity and then
distributed to consumers, the quality of services may vary depending on who provides
the service as well as when, where, and how they are provided. There is a strong
possibility that the same question would be answered slightly differently by different
people and even by the same person at different times. (Wolak. R, 1998) A guest can
receive excellent service one day and not that good another day from the same person,
because service person may have some personal problem or not have felt well. If
travelling by plane the service quality may differ from the first time you travelled by
that airline to the second, because the airhostess is more or less experienced. (Kotler et
al. 1996, 61)
 Simultaneity of service: Services are being produced and consumed at the similar time.
You buy not just the service but also a section of how the service is created and
delivered. Services companies cannot classify functions like sales, customer service, etc.
like you can in manufacturing. Yes, they still possibly need a marketing department, but
all workforce who deal with customers need to be well informed.

key characteristics.

1. Intangibility

Services are intangible and insubstantial: they cannot be touched, gripped, handled,
looked at, smelled, tasted or heard. Thus, there is neither potential nor need for
transport, storage or stocking of services. Furthermore, a service cannot be (re)sold or
owned by somebody, neither can it be turned over from the service provider to the
service consumer nor returned from the service consumer to the service provider.
Solely, the service delivery can be commissioned to a service provider who must
generate and render the service at the distinct request of an authorized service consumer.

2. Perish ability

Services are perishable in two regards

• The service relevant resources, processes and systems are assigned for service
delivery during a definite period in time. If the designated or scheduled service
consumer does not request and consume the service during this period, the service
cannot be performed for him. From the perspective of the service provider, this is a
lost business opportunity as he cannot charge any service delivery; potentially, he can
assign the resources, processes and systems to another service consumer who requests
a service. Examples: The hair dresser serves another client when the scheduled
starting time or time slot is over. An empty seat on a plane never can be utilized and
charged after departure.
• When the service has been completely rendered to the requesting service consumer, this
particular service irreversibly vanishes as it has been consumed by the service consumer.
Example: the passenger has been transported to the destination and cannot be transported

again to this location at this point in time.

3. Inseparability

The service provider is indispensable for service delivery as he must promptly generate and render the
service to the requesting service consumer. In many cases the service delivery is executed
automatically but the service provider must preparatorily assign resources and systems and actively
keep up appropriate service delivery readiness and capabilities. Additionally, the service consumer is
inseparable from service delivery because he is involved in it from requesting it up to consuming the
rendered benefits. Examples: The service consumer must sit in the hair dresser's shop & chair or in the
plane & seat; correspondingly, the hair dresser or the pilot must be in the same shop or plane,
respectively, for delivering the service.

4. Simultaneity

Services are rendered and consumed during the same period of time. As soon as the service consumer
has requested the service (delivery), the particular service must be generated from scratch without any
delay and friction and the service consumer instantaneously consumes the rendered benefits for
executing his upcoming activity or task.

5. Variability

Each service is unique. It is one-time generated, rendered and consumed and can never be exactly
repeated as the point in time, location, circumstances, conditions, current configurations and/or
assigned resources are different for the next delivery, even if the same service consumer requests the
same service. Many services are regarded as heterogeneous or lacking homogeneity and are typically
modified for each service consumer or each new situation (consumerised). Example: The taxi service
which transports the service consumer from his home to the opera is different from the taxi service
which transports the same service consumer from the opera to his home - another point in time, the
other direction, maybe another route, probably another taxi driver and cab.

Each of these characteristics is retractable per se and their inevitable coincidence complicates the
consistent service conception and makes service delivery a challenge in each and every case. Proper
service marketing requires creative visualization to effectively evoke a concrete image in the service
consumer's mind. From the service consumer's point of view, these characteristics make it difficult, or
even impossible, to evaluate or compare services prior to experiencing the service delivery.

Mass generation and delivery of services is very difficult. This can be seen as a problem of inconsistent
service quality. Both inputs and outputs to the processes involved providing services are highly
variable, as are the relationships between these processes, making it difficult to maintain consistent
service quality. For many services there is labor intensity as services usually involve considerable
human activity, rather than a precisely determined process; exceptions include utilities. Human
resource management is important. The human factor is often the key success factor in service
economies. It is difficult to achieve economies of scale or gain dominant market share. There are
demand fluctuations and it can be difficult to forecast demand. Demand can vary by season, time of
day, business cycle, etc. There is consumer involvement as most service provision requires a high
degree of interaction between service consumer and service provider. There is a customer-based
relationship based on creating long-term business relationships. Accountants, attorneys, and financial
advisers maintain long-term relationships with their clients for decades. These repeat consumers refer
friends and family, helping to create a client-based relationship.

INTANGIBILITY: Marketing challenges

• Lack of ability to be stored:

Cannot be stored as buffers for periods of high demand. This translates into constant
supply and demand problems (physicians, movie seats)
 • Lack of protection by patents:
Since the service is intangible , it cannot be patented. New or existing services can be
copied, hence difficulty in maintaining a differential service advantage over competition

• Difficult to display or communicate services:

How does one get the customer to notice the service? Due to intangibility the task of
explaining the merits of the service to consumers is highly challenging

• Difficult to price the services:

Products are priced based on cost-plus basis, while in services the cost can be only
attributed to labour (doctor charges).

INTANGIBILITY: Possible Marketing SOLUTIONS

• Use of tangible clues:

Consumers look a tangible clues or physical evidence surrounding the service. (quality
of furniture, appearance of employees, logos)

• Use of personal sources of information:

Sources like friends, family, opinion leaders are used by consumers to gather
information, word-of-mouth advertising

• Creation of strong organisational brand image:

If the brand is well known and respected, it lowers the perceived risk in the eyes of the
consumer and results in loyalty

INSEparability : Marketing challenges

• Physical connection of the service provider to the service:

Service provider should be physically present to deliver the service (dentist). Face-to-
face interactions with customers makes employee satisfaction crucial.

• Involvement of the customer in the production process:

Requires the customer to be physically present to receive the service (surgery, haircut)
or present at the start and end of service ( dry cleaning, auto repair), or to be mentally
present (adult education).
The customer has a direct impact on the type of service desired

• Involvement of other customers in the production process:

Since production and consumption happen simultaneously, several customers share a
service experience.
This could be negative or positive (restaurants –ve, theatre +ve)

INSEparability: Possible Marketing SOLUTIONS

 Emphasis on selecting and training public contact personnel:

Unhappy employees can affect both, customers in direct contact as also other
employees. A bright, highly motivated employee creates a more pleasant experience for
the customer.
A well trained employee also gives the customer a sense of gratification, training in
skills like reliability, empathy, assurance, etc

 Consumer Management:
Can be minimised through effective consumer management. (separating smokers from
non-smokers, restaurant reservations)

 Use of multisite locations:

Multisite locations would reduce distance for travel to avail of service, offer the
customer better service at each location
heterogeneity : Marketing challenges

 Lack of ability to control service quality before it reaches the consumer

 Most errors are one-time events and cannot be foreseen nor corrected ahead of
time

 Consistency of service varies from firm to firm, among employees of the firm
and also while interacting with the same service provider on day-to-day basis

 Service standardisation and quality control are difficult to achieve and maintain
since each employee is a different personality

heterogeneity : Possible Marketing SOLUTIONS

 Customisation:
Producing or creating services customised exactly to the consumer’s specifications.
Such services end up satisfying a customer, but take longer to produce.
However, the service provider could end up charging a premium for such services

 Standardisation:
The service firm could look at standardisation of services through training employees
and service providers
A better option is to replace human capital with machines (ATMs, automated car wash)

perishability : Marketing challenges

• Refers to the fact that services cannot be stored or inventoried

• Unused capacity is lost forever

• Some services can inventory a part of their services (mostly related to goods)

• Matching demand and supply is a major problem

perishability : Possible Marketing SOLUTIONS

• DEMAND STRATEGY:

• Creative pricing: early bird specials, price offs, discount coupons

• Reservation system: guarantees minimum usage of services.

Drawbacks could be customers no showing up in time for the consumption of the
service, as well as increasing customer expectations since the service would be
available at a specific time

• Development of complementary services (lounge in a restaurant)

• Development of non-peak time demand; use of non peak time to prepare for the
pea time demand

• SUPPLY STRATEGY:

• Part time employee utilisation

• Capacity sharing (service cooperatives, doctors for expensive medical

equipment)

• Utilisaion of third parties (travel agents