Classifying services from a consumer perspective

Roxanne Stell and Casey L. Donoho

Much of the interest and research in services marketing has focussed on the differences that
exist between physical goods and services. Outcomes of these efforts have been numerous
classification schemes designed to organize services according to common service
characteristics. While several service typologies have been proposed, seldom are the service
categorizations examined from a consumers point of view. Further more, only a few service
classifications have been empirically tested (Bowen,1990; Hartman and Lindgren, 1993). In
the development of these typologies there may have been a tendency to emphasize the
differences between goods and services. However, some authors have argued that services are
not fundamentally different from goods and that no pure goods or services exist in todays
marketplace (Enis and Roering, 1981; McDougall and Snetsinger, 1990; Williams and
Mowen, 1990). This stream of thought suggests that the service/good dichotomy is more of a
difference in degree and perhaps more variance exists within each category than between
categories. These distinctions are further blurred when consumers believe that either a good
or service can be purchased to fulfill their needs. For example, when consumers need to have
their documents copied they may purchase a personal copy machine (a good) or visit a copy
center (a service). In these situations services may compete directly with goods (Dholakia and
Venkatraman, 1993). Instead of identifying differences, marketing strategy should be based
on the similarities between services and physical goods with respect to the characteristics of
the total market offering.
Unifying classification
Characteristics such as intangibility, level of customization, variability, and the importance of
employees versus machines have been included in proposed service typologies. As many as
19 different attributes have been used to classify services. With so many different
characteristics, it has been difficult to determine what course of action marketing strategy
should follow. Additionally, it is not clear who (i.e. the firm or the customer) determines the
qualities which the service possesses. Even when consumers are able to distinguish services
from goods by degree of tangibility, dimensions that focus on how consumers generally
respond to or perceive a service category may be more meaningful. With so many
alternatives available in the marketplace, differentiating goods from services may be of
limited importance for consumer decision making.
It has been suggested that separate classifications are not necessary, as a single classification
scheme can be used for all physical goods, services and ideas (Murphy and Enis, 1986).
Services, physical goods and ideas would be classified according to the risk and purchase
effort which the consumer is willing to exchange to receive the product. Risk is the
prepurchase concern that the product may not deliver the expected benefits. Purchase effort
is the amount of money, time, and energy which the buyer is willing to expend to acquire the
product[1]. Based on this proposed classification, consumer perceptions of risk, purchase
Services are not fundamentally different from goods - Characteristics included in
proposed services typologies- Single classification scheme possible
effort and involvement could be used to classify services. The level of involvement refers to
the amount of importance or interest which the consumer attaches to the type of service. The
services would be categorized into one of four groups. These four categories are based on a
well-known taxonomy that includes convenience, preference, shopping, and specialty
goods (Copeland, 1923; Holbrook and Howard, 1977). Several advantages are associated
with the proposed classification. The classification can be generalized across physical goods
and services or across users (e.g. consumer, industrial and not-for-profit). Perhaps more
importantly, the services are examined from a consumer point of view by incorporating three
different aspects of consumer behavior: perceived risk, purchase effort and consumer
involvement.
Although perceived risk has been examined in services, consumers risk perceptions have
not been used to classify services. Instead, the focus has been to demonstrate that services are
more risky than physical goods (Murray and Schlacter, 1990). Rather than separating services
from goods in terms of risk, this classification suggests that risk, as well as purchase effort
and consumer involvement, varies across different types of services. It was the purpose of
this study to examine empirically, for the first time, the proposed classification scheme with
several different services.
The study
This study is an initial attempt to classify services based on an existing taxonomy. The
eight different services examined were film processing, postal services, fast-food
restaurants, photocopy services, hair stylists, dentists, concerts and vacations.
Respondents evaluated the degree of risk, purchase effort and involvement they
associated with these services. The varying levels of risk, purchase effort and
involvement were used to classify the eight services into one of the four categories:
convenience, preference, shopping or specialty. The methodology used in this study is
presented in the Appendix.
Classification categories
Based on the proposed classification, each of the four categories is described below. The
level of risk and purchase effort is expected to vary from low to high for each category.
Consumer involvement is conceptualized as low for convenience and preference services and
high for shopping and specialty services.

Risk varies across different services - Convenience products are relatively inexpensive
Convenience services
Generally, convenience products are relatively inexpensive and frequently purchased.
Relative to the other three categories, convenience services are considered to have the lowest
level of perceived risk and purchase effort. In addition, consumers are thought to have little
involvement with convenience services. Film processing and postal services were used to
represent convenience services in this study.
Preference services
Consumers have preferences for specific brands, yet they are willing to make substitutions if
necessary. A preference service is a convenience service that becomes differentiated through
branding and developing some degree of brand loyalty. Preference services are
conceptualized as much higher on risk and slightly higher on purchase effort compared with
convenience services. Preference services are also considered to be low involvement. To
indicate that a preference existed, the term favorite was attached to fast-food restaurants
and photocopy shops. These two services were used to represent preference services in this
study.
Shopping services

It is believed that consumers will perceive greater amounts of risk with shopping services
compared with convenience and preference services. Consumers are willing to spend a
greater amount of purchase effort in searching for and evaluating shopping services.
Compared with convenience and preference services, shopping services are considered to be
high involvement. Dentists and hair stylists were used to represent shopping services.

Shopping services are high involvement

Specialty services

A specialty service is a shopping service that reaches the ultimate in differentiation and brand
loyalty, where only the chosen service company or service provider is acceptable to the
consumer. These services are conceptualized as high risk and are distinguished from
shopping services primarily in terms of higher purchasing effort. Consumers are willing to
wait, search high and low, and not settle for anything less. Compared with convenience and
preference services, consumers are expected to have a higher level of involvement with
specialty services. In this study, specialty services included one-of-a-kind vacations and
favorite concerts.

The ultimate in differentiation and brand loyalty

Research questions

Based on the proposed classification, the following questions were addressed in this study:

Can consumer perceptions of risk, purchase effort, and involvement be used to classify
different types of services?

Are convenience services lowest in perceived risk, followed in risk order by preference,
shopping, and specialty services?

Are convenience services lowest in purchase effort, followed in purchase effort order by
preference, shopping, and specialty services?

Are convenience and preference services lower in involvement compared with shopping and
specialty services?

Classification results and discussion

Overall, it appears that perceived risk, purchase effort and involvement could be used to
classify services into convenience, preference, shopping and specialty categories. The results
suggest that the existing classification, with some refinement, may be useful in categorizing
services as well as physical goods.

Since the internal reliability for perceived risk, purchase effort and involvement was
acceptable[2] (Churchill, 1979), composite scores for each of the constructs were computed
by taking the mean of the individual scale items. The overall means are presented in Table I
and graphically depicted in

Figure 1. Mean difference tests were performed on these composite means, the results of
which are presented in Table II.


Table II




Convenience services were perceived as low risk services. Respondents considered film
processing and postal services (convenience services) to have significantly less risk than
dentists and hair stylists (shopping services) or concerts and vacations (specialty services).
Although perceived risk had been proposed as the distinguishing feature between
convenience and preference goods, the lack of significant findings is not totally unexpected.
Preference goods are created through branding and advertising which convinces consumers
that the product is better than others. It is very possible that once consumers have established
a preference for a particular service facility or service provider, the risk is lower than it would
be where no preference exists. With preference services consumers make substitutions only if
necessary. Risk may be higher only when the consumer is forced to make these substitutions.
Since these services are the preferred, there may be little risk associated with obtaining them.

As expected, purchase effort was the lowest for convenience services and it increased for
each successive classification category. Rather than risk, purchase effort appeared to be an
important factor for distinguishing between convenience and preference services. Specialty
services were also distinguished from shopping services on the basis of purchase effort. That
is, respondents were willing to expend significantly greater effort for a one-of- a-kind
vacation and favorite concert (specialty services), than for a dentist or hair stylist (shopping
services).

Consumer involvement was lower for convenience and preference services compared with
shopping and specialty services. However, the level of involvement significantly increased
for each successive classification category. Respondents involvement was lowest with
convenience services (film processing and postal services) and it increased with preference
(fast- food restaurants, photocopy shops), shopping (dentists, hair stylists), and specialty
services (vacations, concerts).

While the results provide substantial support for the proposed classification, three interesting
differences emerged. First, risk was hypothesized to range from low (convenience services),
medium-low (preference services), medium-high (shopping services) to high (specialty
services). However, rather than finding four risk levels, risk dichotomized the classification
categories into convenience-preference (low risk) and shopping-specialty (high risk) services.
Second, shopping services were hypothesized to have higher purchase effort compared with
preference services. Instead, purchase effort was the same for shopping and preference
services. This result suggests that preference services should be defined as similar in risk to
convenience goods, but similar to shopping services in terms of purchase effort. Rather than
the four hypothesized levels of purchase effort, the results indicate three levels of purchase
effort: low purchase effort (convenience services), medium purchase effort (preference and
shopping services), and high purchase effort (specialty services). Third, involvement was
hypothesized to be either low (convenience and preference services) or high (shopping and
specialty services). However, involvement was significantly different for all four
classification categories. Convenience services represented the lowest involvement, followed
by preference, shopping, and specialty services.

Managerial implications and recommendations

As with physical goods, this study found that individuals can differentiate services in terms of
perceived risk, purchase effort, and involvement. The findings offer strong support for
services marketers to consider consumer perceptions when classifying services. Several
important implications emerge from these findings.
Convenience services perceived as low risk services - Purchase effort was lowest for
convenience services
Consumer risk varies by service category
Perceived risk is a significant factor in differentiating between various types of services.
Rather than simply accepting the idea that services are more risky than physical goods,
managers should consider the degree of risk associated with their specific service offering.
The present findings support the notion that the amount of risk consumers perceive varies
among different types of services. That is, the consumer views shopping and specialty
services to have considerably more risk than convenience or preference services. When
consumers are unwilling to accept much risk there will be a continuing pressure to reduce
risk for the consumer. Hence, the need for risk reduction strategies will vary by service
category.

Consumer involvement and effort vary by service category
In addition to risk, the level of consumer involvement and purchase effort vary according to
the service category. Different levels of involvement or interest may influence the amount of
effort the consumer is willing to exert to acquire the service. For each type of service
category, this has several implications.

For example, lower levels of consumer involvement are associated with convenience and
preference services. Consequently, consumers with minimal interest are not willing to go out
of their way to obtain the service. Under these circumstances, consumers are likely to select a
service facility that is open, the closest, or have the shortest waiting time. The marketing
focus should be to provide quick, hassle-free transactions or employ methods that reduce
perceived waiting time (Haynes, 1990). Since the consumer has limited interest with the
service category, communication materials that require much effort (e.g. lengthy, detailed
copy) should be avoided.

On the other hand, shopping and specialty services have higher levels of consumer
involvement. Since the consumer is more interested in the service category, they are willing
to expend greater purchase effort to secure the service. With shopping and specialty goods,
decisions are made by comparing quality, features and price. This may also be true for
services. However, because it is often difficult to examine services prior to purchase,
providing tangible cues and comparative information would be helpful. Service firms who
wish to be perceived as a shopping or specialty service should achieve high levels of
consumer involvement. This will require strategies that engage the consumer and identify
potential risks associated with purchasing the service. For example, a consumer electronics
retailer that provides custom installation can emphasize and allow the consumer to experience
the improved performance of the system that results from professional installation. The
customer will be reminded of the risk involved in drilling holes in the structure or vehicle and
how the systems appearance will be enhanced when wires and cables are hidden from view.
The advantages offered by the service provider, as well as the difficulty and risk of switching
to another provider, should be emphasized. Providing a more customized service which
requires consumer participation can raise the level of consumer involvement and increase
switching costs. For a specialty category distinction, consumers must perceive the service as
the only provider capable of satisfying their special needs or must consider them to be a one-
of-a-kind service.

Perceived risk is a significant factor ---Shopping and specialty services have higher
levels of involvement

Consumer choice sets can include both goods and services
From a consumer perspective, many services compete with goods. Consumers do not enter
into an exchange thinking about purchasing a service today and a good tomorrow. Instead,
they seek a good or service offering that will solve their current or future needs. Consumers
are likely to consider different alternatives (goods and services) that offer similar benefits as
competitive substitutes (Dholakia and Venkatraman, 1993). Since, this unifying classification
scheme is able to incorporate both goods and services it provides a more comprehensive view
of possible competitors from which the consumer might select. Service providers can
examine the degree of consumer risk, purchase effort, and consumer involvement associated
with their service to place both services and goods into one of the four classification groups.

Identifying non-service competitors may suggest strategies to reduce possible threats from
goods that compete directly with the service offered. For example, each spring consumers
needing to file their tax returns can accomplish this task by purchasing Turbotax software (a
good) or visiting H&R Block (a service). It now becomes the task of the service marketer to
differentiate the service from the physical good. If these two alternatives are perceived as
shopping goods, then consumers perceive both to be high risk, medium effort, medium-high
involvement. To be perceived more favorably than Turbotax, H&R Block may focus on
reducing the consumers risk and effort. To lower the risk, guarantees for the lowest tax
amount or quickest refund can be offered. To lower consumer effort, H&R Block can
promote the time saving advantages of having their tax returns prepared for them. In addition,
strategies that build involvement with H&R Block become important. H&R Block can
increase involvement through establishing ongoing client-preparer relationships where
switching costs are perceived to be high by the consumer. Once a positive relationship is
built, the consumer would be less likely to switch to Turbotax (the goods alternative).
Incentives such as fee discounts could also be used to encourage repeat patronage with H&R
Block. It is important that service marketers understand how their goods competitors are also
reducing risk and effort for the consumer. For example, Turbotax offers a money-back
guarantee to reduce risk and direct- mail purchasing to reduce effort. When the consumer is
considering between a service and physical good, service marketers are advised to
acknowledge these possible competitors in order to successfully differentiate their offering
and motivate the consumer to use their service.

The importance of a consumer perspective
Examining services from a consumer perspective can provide service marketers with new
insights into the service offering. It is the consumers who ultimately decide how interested
they are, how much energy they will exert and the riskiness of the offer. All of these factors
can influence consumer actions. For example, the amount and type of information which the
consumer seeks may vary between convenience, preference, shopping and specialty services.
In addition, the number of alternatives the consumer considers is likely to vary between
service categories. Knowing that consumer involvement, purchase effort and risk vary across
service categories, service marketers may want to consider these factors when developing
segmentation, targeting, and positioning strategies.

Future research

The current study offers support for the notion that a unifying classification system for goods
and services is possible. There are several opportunities to expand the present study and
provide additional evidence for a unifying classification scheme.

Many services compete with goods -- Strategies to reduce possible threats --New insights
into the service offering

While the present study examined services exclusively, future research could include services
and physical goods to determine the extent to which they are similar in terms of perceived
risk, purchase effort, and consumer involvement. It would be helpful to uncover the types of
services and goods that are classified as specialty, shopping, preference, and convenience.

Only three constructs (perceived risk, purchase effort, and involvement) were used in this
study. Future research could incorporate additional constructs and examine the relative
importance of each. In this study, consumer involvement was the most successful construct in
organizing each of the eight services into their respective categories. Investigating consumer
involvement in more depth (e.g. situational versus enduring involvement) within the services
arena may be quite useful.

Conclusion
Marketers have implemented strategies based on the convenience, preference, shopping,
specialty classification system for many years. The findings from this study suggest that this
traditional taxonomy may also be useful in classifying services. Perceived risk, purchase
effort, and involvement measures can be used to place services into this classification
scheme. In this respect, although preliminary in nature, the study suggests that further
investigation of this unifying classification may provide additional insights for services
marketing strategy.
Notes

1.Throughout the paper the term product is conceptualized as being broader in scope and
includes physical goods, services, and ideas. The term good is used to refer to physical
goods.

2. Reliability coefficients ranged from 0.62 to 0.82 as measured by Cronbachs alpha.

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Appendix : Study methodology

Sample and procedure

Given that this study attempted to confirm or falsify a classification scheme, a convenience
sample of students was selected. One-hundred-and-sixty-eight questionnaires were
distributed to students at a medium-sized university in the southwestern USA. The mean age
was 22.5 years with a range from 19 to 41 years. Of the sample, 45.5 percent were female and
54.5 percent were male. The mean work experience was 5.2 years with a range from zero to
20 years. In general terms, the sample appears to represent the demographics of the
traditional upper-division undergraduate student.

From a review of the literature, an initial pool of 24 different services was considered for
inclusion in the study. However, it was important that the final group of services was familiar
to the respondents. Eight different services, two for each classification category, were
evaluated on the basis of perceived risk, purchase effort, and involvement. The students were
divided into two groups with each group evaluating five of the eight services. This allowed
students to complete the questionnaire in a timely manner and avoid respondent fatigue.
Within each of the two groups, the services were ordered in four different ways to randomize
any order effects. There were no statistically significant differences between the different
ordered groups.

Construct measures

Multi-item measures of perceived risk, purchase effort, and involvement were used to classify
the eight services as convenience, preference, shopping, and specialty. Minor modifications
were necessary for various items on the scales to provide sensible response choices within a
service context.

Perceived risk is the individuals feeling, rather than objective reality, that something may go
wrong in an exchange. There are several risk dimensions that have been identified in the
literature (Jacoby and Kaplan, 1972). For this study six dimensions of risk were used:
functional, physical, financial, psychological, social, and time risk.

Purchase effort is concerned with how much energy the consumer is willing to expend for the
exchange to occur. Since services are often high in experience or credence qualities and low
in search qualities (Iacobucci, 1992), it is often impractical for consumers to shop a number
of service facilities to evaluate service attributes prior to purchase. Rather than simply relying
on the number of service facilities visited, purchase effort was measured by asking
respondents to indicate their willingness to plan, travel, shop and wait for each of the
different services.

Involvement is often viewed as the level of interest or importance which a good evokes in an
individual. The involvement scale used in this study included items to measure: the
respondents level of interest in the service; the extent they think about it; the degree of
importance it has to their everyday life; the amount of enjoyment it brings; and their desire to
keep up with information concerning the particular service (Bloch, 1981).

Limitations

College students were chosen as the subjects for this study for a number of reasons. The key
variables could be targeted to their existing knowledge structures and interests. Students also
provided a reasonably homogeneous group which permits more exact theoretical predictions
than may be possible with the greater variability of heterogeneous groups (Calder et al.,
1981).However, caution is advised when generalizing these results to a more diverse
(heterogeneous)population.

The services selected closely represent the proposed classification and were chosen to fit
student experiences and interests. However, only eight services representing the four
categories were evaluated. Before generalizing the results of this study, a broader range of
services should be examined.

This study implied a wide range of monetary costs (i.e. from postal services to one-of-a-kind
vacations). However, no specific attempt was made to control for the difference in costs
between the categories of services. Future studies could control for monetary cost by trying to
choose services for different categories that fall within similar price ranges.

Roxanne Stell is an Associate Professor of Marketing and Casey L. Donoho is an Assistant
Professor of Marketing, both at the College of Business Administration, Northern Arizona
University, Flag staff, Arizona, USA.

Executive summary and implications for managers and executives
Applying a retail classification to services
The dichotomy between services and goods is no longer clear (if indeed it ever was). The
production and sale of goods involves a considerable service element. This element has
become an area of great significance as businesses see service quality as an important way to
differentiate their company or product from competitors. Customers also see service elements
as important. In developing a model for identifying potential product features that delight,
Hinterluber et al. (JPBM, Vol. 5 No. 2) revealed that service elements are as important as
intrinsic product performance.

Stell and Donoho embrace the customers valuing of service factors in developing a
classification of services from the perspective of those consumers. They argue that the
traditional classifications are internally biased and, in particular, prove difficult to apply in
the case of retail services. Not only does the sale of goods involve a service but the provision
of a retail service often includes a major tangible element. Not only does the sale of goods
involve a service but the provision of a retail service often includes a major tangible element.
When our car is serviced we pay not just for the labor but for a range of goods oil,
antifreeze and, if needed, replacement parts. Similar observations apply for most other retail
services indeed there are very few pure retail services.

Stell and Donohos approach is to eschew these considerations and the semantics of service
definition. Instead they consider how much effort, risk and involvement the consumer applies
to searching out and using a retail service. In this respect their classification is as much a
retail classification as a service classification since they apply an established taxonomy for
goods retailing to the service circumstance. The result acknowledges the reality that
consumers do not see any important differences between retail services and goods retailers.
The presence of photo-processing, dry cleaning and hairdressers in a shopping center or high
street is as important a part of the retail mix as the presence of fashion shops and booksellers.

The taxonomy separates retail services into one of four categories convenience, preference,
and shopping and specialty services. Each of these represents a different degree of purchase
effort, perceived risk and consumer involvement. Such an approach assesses the business
from the perspective of the customers how do they consume the service? How important is
the purchase to them? How much trouble will customers go to in obtaining the service?

Through such a classification managers can begin to see through the fog of conflicting
service, promotion and strategy options open to a retail business. It may seem obvious that
the extent of consumer involvement in hair styling is greater than for photo-processing but I
am not sure that those running hairdressers always appreciate this fact! It makes an impact on
their location, the way in which they promote the business and the elements within the
service mix that require particular attention.

A further important finding emerging from this research is that the three behavioral aspects
investigated (effort, risk and involvement) are not spread evenly. Stell and Donoho discover
that risk is divided between low risk and high risk rather than differing for each class of retail
service. Similar findings emerged for effort. The result is a definition of the various services
that differed from the authors original hypothesis:

(1)Convenience services: low risk; low effort; very low involvement.

(2)Preference services: low risk; medium effort; low involvement.

(3)Shopping services: high risk; medium effort; high involvement.

(4)Specialty services: high risk; high effort; very high involvement.

This finding suggests to me that the classification has a weakness in that (as ever with
taxonomies) it seeks to put business into one or other category. Inevitably some will fall close
to the line between two categories, causing confusion. It might be better to view the
measures of consumer perceptions as continua rather than categories. This requires a way to
establish where on each continuum a particular business falls. Furthermore issues such as
frequency of use and circumstances of use also need consideration. We may visit the
hairdresser every month whereas the car gets serviced just once or twice each year. For postal
services there may be differences that make them less of a convenience good somebody
with relatives overseas perhaps has a greater perception of risk than someone who only sends
Christmas and birthday cards in their own locality. The idea of a unifying classification for
retailing of goods and services represents a valuable step forward since it reflects reality more
closely. For a service marketer the resulting findings provide some guidance. However,
marketers need to know that any classification assists in the development of strategies and
tactics and the allocation of resources. Understanding the way in which people consume retail
services helps address this problem by ruling out particular approaches or by allowing the
rationalization of decisions about location or promotion. Ultimately the knowledge that a
particular business falls into a particular category is only useful if it gives a more detailed
picture than that emerging from this study. The authors acknowledge that aspects other than
risk, effort and involvement need examination. Perhaps there is a further need to examine the
factors that constitute the three constructs used in this study what, for example, does the
consumer see as risky?

Classifications and taxonomies are always helpful in that they provide a short hand for a
particular aspect of business analysis. Calling something a convenience service helps to
simplify the positioning of an otherwise complex business. It suggests that a marketer
focussing on the one construct convenience is likely to achieve some success. Research
can then concentrate on the extent to which the service and marketing effort is delivering the
convenience desired by customers.

(Supplied by Marketing Consultants for MCB University Press)