Concept of Service…..

Do you Agree Services are going to move in this Decade to being the front edge of the
Industry…….?????..
What Are Services ….

In Simple Terms Services are Deeds ,processes and performances provided or co-produced by
one entity

 A service is any activity of benefit that one party can offer to another that is essentially
intangible & doesn’t result in the ownership of anything. Its production may or may not be
tied to a physical product.

Thus services are those activities which satisfy wants. Some services are offered individually
while some others are offered as a supplement to a product purchased or a major service
consumed by the customer.
Tangibility Spectrum :
Essentially services are intangible, but sometimes they may involve the use of some tangible
goods. In such cases the title of goods doesn’t change from the service provider to the
customer. But again some services do have a tangible component.
The key factor which differentiates a service from a product is its intangibility. This line of
demarcation is thinning down day by day and now marketers attach a service to the product,
and vice versa. Thus we see that there are four types of offer involving goods & services :
PURE TANGIBLE GOODS :
These include physical products, consumer products, consumer durables, which don’t have
any service component attached to the product.
TANGIBLE GOODS WITH ACCOMPANYING SERVICES :
These goods need repair & maintenance from time to time, and the company provides after
sales service to improve customer satisfaction.
MAJOR SERVICES ACCOMPANYING MINOR GOODS :
These services include a small or minor amount of goods for consumption or use. E.g. Air
Travel includes foods, drinks, confectioneries, etc.
A PURE SERVICE :
These are only services where the element of intangibility & non-transfer of ownership is
maintained. E.g., consultancy, teaching, medical treatment, legal advice, etc.
Let’s put a set of products & services in order from pure tangible goods to pure services as
follows :
SALT 
SOFT DRINKS 
CD PLAYER 
GOLF CLUBS 
AUTOMOBILES 
COSMETICS 
TAILORED CLOTHING 
FURNITURE RENTAL 
 CHARACTERISTICS OF SERVICES

INTANGIBILITY :
The basic difference between a product & a service is their tangibility, i.e., products have
tangible attributes & services have intangible attributes. Goods’ attributes can be defined,
tested and measured, where as these can’t be tested for services – one can know only when he
has experienced or consumed it. Also the satisfaction can be felt but not measured. Qualities of
a product can be measured & maintained, but for services they can’t be done directly, but by
some other subjective method like paying attention, emotional or moral support to the clients.

HETEROGENEITY :
Normally machines manufacture the physical goods which can be controlled or programmed to
produce the products of similar or same quality parameters. But as the service involve persons
directly, it is difficult to maintain the level of uniformity. This varies from time to time, place
to place, mood to mood, condition to condition, etc. Sometimes this heterogeneity can be
productively used for differentiating services for discerning & general customers.
INSEPARABILITY :
Generally, the goods are produced & stocked before selling & consumption. But, in contrast
the services are consumed at the time of production, i.e., they can’t be stocked or kept on the
shelf before consumption. Since, the production & consumption happen simultaneously, and
there is an interaction between the consumer & the marketer or its representatives, hence the
provider and the service become inseparable. Thus consumers tend to relate the server (who
is responsible for the serving) to the quality of the service.

PERISHABILITY :
Certain consumables, like ripe fruits perish in the course of time if they are not consumed,
and become unfit for consumption, which is a loss to the seller. Similarly, here, some kinds of
services if not consumed when it is available, are lost for ever, which is a loss to the marketer
Generic Differences between Goods & Services

NATURE OF THE PRODUCT :

In most cases the market offerings are some combination of the two in different proportions. The
marketers adopt different strategies for different combinations.

PROBLEMS IN QUALITY CONTROL :

The intangible nature of the services makes it difficult for the quality definition, measurement,
setting standards & delivery. In fact they are all inside the mind of the consumer, which differs
from person to person according to their perception. The other problem is that the quality can’t
be improved once it is delivered for it gets consumed on delivery. So the marketer has to be very
careful about the quality at the time of delivery.
INVOLVEMENT OF CUSTOMER IN PRODUCTION & DELIVERY :

Goods are produced & stored till some buyers buy them. In contrast most services are
designed, produced & delivered in the presence of buyers according to their need & order. So
not only the buyers decide the quality & other attributes of a service, they also influence or
create an environment for the delivery with interaction with the servers. This may be pleasant /
favourable or unpleasant / unfavourable which again tell upon the final delivery quality. To
eliminate the interaction with the servers and to enhance the buyer involvement, today many
automation have taken place, like ATMs, Tele banking etc.

ABSENCE OF INVENTORIES :
Services can’t be stored unlike goods, when demand is less more goods can be produced &
stored to meet the increased demand at a future date. Services are not available later if they
are not utilised at the time of availability. Also in case of mass or group service, the capacity
can’t be exceeded
STRUCTURE & NATURE OF DISTRIBUTION CHANNELS :

For the goods there are distribution channels which make them available with the buyers. But
services normally don’t have one as these are consumed at the time & point of production, so
this is like direct marketing of goods. The services come directly from the service provider or
its franchise.
IMPORTANCE OF PROMPT SERVICE :
Time plays an important role in providing service. People don’t like to wait for the service to
be delivered, and look for that elsewhere. In case of goods, the time tolerance limit is more in
general.
DIFFICULTY IN EVALUATING SERVICE QUALITY :
It’s very difficult to assess or evaluate a service before consuming or experiencing it. The best
method available for this purpose is to go by others who have used the service – word-of-
mouth, opinion of the experiencers. But again the experience or the level of satisfaction varies
from person to person, so one has to be careful in selecting
 The Four I’s of Service Marketing
Intangibility
Services are inherently experiential.  They will typically involve some sort of accompanying
product, also known as the facilitating good; however, the primary value to the consumer is
intangible
Inconsistency
Service delivery is prone to inconsistency.  The most successful service brands will often
invest heavily in training and quality control programs in an attempt to reduce inconsistency.
Inseparability
In addition to being intangible, a service is also inherently inseparable from the service
delivery vehicle.  It involves a necessary ‘touch point’ with the customer that is necessarily
linked to the service itself.
Inventory
Although services may be linked to a facilitating good, inventory associated with a service is
perishable.
NEW SERVICE DEVELOPMENT
NEW SERVICE DEVELOPMENT
CYCLE
1) Concept Generation
2) Concept Screening
3) Preliminary Design
4) Design Evaluation and improvement
5) Prototyping and Final Design
6) Developing the operation Process
1) Concept Generation :- Ideas for new product or service concepts may be
generated from sources outside the organisation,such as expressed customers
needs or competitor activity or from sources within the organization such as
sales staff and front of house operation staff or more formally from R&D
department.
2) Concept Screening:-Not all concepts, or variants within the concept have the
potential to develop through to market launch. The purpose of the concept –
screening stage is to take the flow of concepts emerging from the development
process and evaluate them. Concepts may have to pass through many different
screens and several function involved.
3) Preliminary design :- This stage represent the beginning of detailed work on
the product or service design. It includes defining what will go onto the product
or service. This require the collection of information about such things as the
constituent component parts which make-up the product –service package, the
product/service structure.
4) Design Evaluation and Improvement:-This stage takes the preliminary design
and attempts to improve it before the prototype product or services are tested in
the market. There are a number of techniques that can be employed at this stage
to evaluate and improve the preliminary design. Some of these techniques are
concerned with fully exploring the technical characteristics of the product or
service in an effort to improve its overall value.
5) Prototyping and final Design:- Often “close to final” design are
prototyped. Partly the next stage in the design activity is to turn the
improved design into a prototype so that it can be tested. This may be
to learn more about the nature of the proposed product or service but
often it is also to reduce the risk inherent in going straight to market .
6) Developing the operation Process:-
Most models of product and service development assume that the
final stage will involve developing the operations process which will
eventually produce the designed product or service .In practice,
product/service development on the one hand and process
development on the other are inexorably linked. Placing this stage at
end of the development Process, However, does reinforce the idea
that, generally speaking, if the development process is intended to
design products or services which will fulfill a market need, then
process decision can only take place after some product or service .
SERVICE INNOVATION
• Radical Service
Innovation
• Requires a different process and
design approach than incremental
innovation
• Innovative service firms require enablers
to facilitate the process
• Nature of change will dictate where
resources are allocated
• Radical innovations imply increased risk
and resource investment
SERVICE SYSTEM
DESIGN
•
Service Decision Factors
• Facility Location (based upon proximity
to customers)
• Facility Layout (depends on the presence of
the customer at the location)
• Product and Process Design (Covers both
the intangible and tangible aspects of the
service offering)
• Scheduling (how the workers are assigned to
the service)
• Quality Control, Measures and Time
Standards (focus is on the needs of the
customer)
SERVICE SYSTEM
DESIGN
• Service Decision Factors
• Demand/Capacity Planning (depends on the
type of service and the immediacy of
matching supply to demand)
• Customer Contact Level (physical
presence and length of time that a
customer spends with a service provider)
• Industrialization (the substitution of
technology for people)
• Front Line Personnel Discretion (denotes
the flexibility of the service employee
while interacting with a customer)
SERVICE SYSTEM DESIGN
• Service Decision
Factors
• Worker Skills (depend on service strategy
and concept, customer contact level and
industrialization level)
• Sales Opportunities (coincide with high
customer contact and employee
discretion)
• Standardization of Service Offering (level
of uniformity provided in the service)
• Customer Participation (substitution
of consumer labor for provider
labor)
SERVICE SYSTEM
DESIGN AND
INNOVATION
• Supporting facilities must be in place
prior to offering a service
• Facilitating goods such as a product
or other tangible features are part of
the service
• Sensual and psychological benefits
are associated with the service
offering
• Services might be bundled into
one supporting facility
• Must differentiate between core
and ancillary services
SERVICE SYSTEM
DESIGN AND
INNOVATION Low Face to Face Delivery

Industrialization
Telephone or Courier Current Service Incremental Service
Delivery Innovation
Level

Technology Based Technology-Driven Service Radical Service

Self-Service Innovation Innovation
High
Low
High Standardization of Service Offering
SERVICE
SYSTEM DESIGN
TOOLS
• Service Blueprinting
• Design tool based on the process
flow diagram
• Delineate front office from back
office operations
• Determine standard or maximum
execution times, materials and the exact
process for each step
• Identify potential failure points and
generate mitigation plans to prevent or
recover from a failure
SERVICE
SYSTEM DESIGN
TOOLS
Service Blueprint for Espresso and Coffee Shop
Seen by customer

Take Drink Collect Make Drink Deliver Drink

Order Payment

Materials
Fail
(Coffee, flavors,
Poi milk, cups,
nt etc.)

Line of Visibility

Prepare Order
Mixes Supplies

Not seen by customer

SERVICE SYSTEM DESIGN TOOLS
• Customer Utility
Models
• Success depends upon customer’s
perceived utility or benefit provided
by the service’s price or non-price
attributes
• Promise of customer utility
measurement is the ability to
optimize the design of a service
• Satisfaction with the quality of
service affects customer loyalty
and repurchase intent
SERVICE
SYSTEM
TO O L S
DESIGN
• C u s tomer Utility Models
• Service quality can be measured
along five principle dimensions
• Reliability, responsiveness, assurance,
empathy and the tangible aspect of
the service
• Improving reliability can result in
increased labor and training costs
• Responsiveness may be enhanced by
reducing queue times
• Empathy and assurance can be influenced by
the ability of service providers to convey
knowledge, courtesy and impressions of
caring
• Enhancing the tangible attributes of a
service increases costs of consumables
SERVICE SYSTEM DESIGN TOOLS
• Customer Utility
Models
• Conjoint analysis (CJA) and discrete
choice analysis (DCA) are used to
model customer behavior
• Discrete choice experiments involve
careful design of service profile choice
sets
• Design of a new airport restaurant requires
the following
• Identification of important attributes
• Specification of attribute levels
• Experimental design
• Presentation of alternatives of respondents
• Estimation of choice model
NEW SERVICE DESIGN FOR
SNOWBIRD SKI RESORT
Determine Appropriate Service Attributes
(e.g., Price, Service Time, Intangible, & Tangibles)

Determine all variables and costs related to Service Attributes &

demand -capacity matching strategies

Collect Customer Attribute Information using choice-

based or ratings-based conjoint analysis

Solve for Customer Segments and Utility Weights (s)

using multinomial Logit or regression analysis
Profile N with Customer waiting
attributes, time
price, and cost

Feasibility
Evaluate Market
Share & Profit
& Profit
NEW SERVICE DESIGN FOR
SNOWBIRD
RE SKI Ski Area A Features Ski Area B
R u g g e d terrain, sparsely forested, a n d R u g g e d terrain, sparsely forested,
dramatic rock peaks Physical Setting and dramatic rock peaks

4 0 minutes drive from h o me Distance 4 0 minutes drive from h o me

70 inches Snow Base 70 inches
1 2 inches n e w powder New Snow 12 inches n ew powder
3 , 2 5 0 feet Ve r t i c a l D r o p 3 ,2 5 0 feet
G r o o m e d trails w i t h g l a d e s a n d b o w l s Ty p e of R u n s G r o o m e d trails o n l y
3 5 ski runs Size of Area 3 5 ski runs

2 5 % Advanced,, 5 0 % Intermediate, 2 5 % Advanced,, 5 0 % Intermediate,

Challenge
2 5 % Beginner 2 5 % Beginner
S k i s h o p s , res t au ran ts , n i g h t life, S k i s h o p s , res t au ran t s , n i g h t life,
Facilities
boutiques, lodging boutiques, lodging
$50 per day Ticket Price $20 per day
3 0 minu tes at p e a k time Lift Line Wa i t 3 0 minutes at pe ak time
M o s t l y triples a n d q u a d s Ty p e of Lifts M o s t l y triples a n d q u a d s
Not allowed Snowboards Not allowed

Su p p o s e the t wo ski areas described a b o v e were the only o n es available for your next ski outing. Please
ch eck (  ) o n e b o x b e l o w to indicate what y o u wo u l d mo st likely do:

I would choose Ski Area A.

I would choose Ski Area
B.
I wo u l d d o something else
a n d not ski.
SUMMARY
• Challenges to service design
• Intangible nature of service encounters
• Inability to prototype and test
new concepts
• Propensity to use ad-hoc
methods
• Innovations come through
incremental and radical new
services
• The two approaches address the
same factors (i.e. customer contact
and industrialization)
 ETHICAL ISSUES

•Ethics are moral guidelines which govern good business

practices/behavior. So behaving ethically is doing what is morally rig
Behaving ethically in business is widely regarded as good business
practice.
•Ethical Issues in Marketing:
•revolves around the 4p’s of marketing: • product & packaging • pric
• placing (distribution) • promotion (advertising & branding)
1. Product
• Consumer safety
• Product liability and
reliability
• Designing for special needs.
2.
• Packaging
Label
• information
• Packaging safety
Environmental
implication of
packaging
3. Price:
•Supra competitive pricing
•Price fixing
• Price skimming
• Price wars
• Price collusion (agreeing with other
competitors to set prices in a
market to the detriment of
competition and consumers
•Predatory pricing
• Predatory pricing• Price war•
Dumping (pricing policy)• Variable
pricing(distribution)
4 Placing
• Targeting the vulnerable
(e.g. children, the elderly)
•Excluding potential
customers
from the market (e.g.
discouraging demand from
undesirable
market sectors or simply
refusing to sell to certain
•Paying vendors to carry a firms product
rather than one of its competitors are
also unethical. Most drug stores would
give too many drugs without
prescription from a qualified doctor are
also unethical. Products are moved in
unsafe vehicles ,are also unethical.
5. Promotion (advertising &branding)
Ethical Issues in Advertising
• Puffery- False or exagerated praise
• Advertising to Children
• Promoting Unhealthy Products
•Subliminal Advertising-the use
by advertisers of images and sounds
to influence consumers' responses
without their being conscious of it.
• Deceptive Advertising- issues
over truth and honesty
. Issues with violence, sex and
profanity
FACTS AND TV STATISTICS (
unethical issues about
advertising)
•A new survey conducted by the Pew
Research Center showed that 75% of
the 1,505 adults polled from March
17-21 would like to see tighter
enforcement of government rules on
broadcast content, particularly when
children are most likely to be
watching; 60% want broadcast TV
indecency standards extended to
cable TV; and 69% want higher fines
for media companies.
In a recent (03.20.13) Time Magazine Poll 53
percent of respondents said that they think
the government should place stricter controls
on broadcast-channel shows depicting sex
and violence. 68 percent believe the
entertainment industry has lost touch with
viewers' moral standards. 66 percent said
there is too much violence on open-air TV, 58
percent said too much cursing and 50 percent
said there is too much sexual content on TV.
49 percent say government regulation should
be extended to cover basic cable.
Ethical issues in
Marketing
1.
• Market research:
invasion of privacy (e.g. obtaining
dataresearch
without permission)
•Stereotyping – drawing unfair or
inappropriate conclusions
2. Target customers and market:

1. Targeting the vulnerable

(e.g. children, the elderly)
2. Excluding potential customers
from the market (e.g.
discouraging
demand from undesirable
market sectors or simply
refusing to sell to
certain customers
3. Pricing
1. Price fixing
2. Price wars
3. Price collusion (agreeing with
other competitors to set prices in
a market to the detriment of
competition and consumers)
4. Advertising and promotion
1. Issues over truth and honesty
2. Issues with violence, sex and
profanity
 3. Taste and controversy
4. Negative advertising
Price fixing is illegal. It is considered to
be anti-competitive as well as unethical
• Agree prices with its competitors (e.g.
it can't agree to work from a shared
minimum price list)
• Share markets or limit production to
raise prices (e.g. if two contracts are put
out to tender, one business can't agree
that it will bid for one and let a
competitor bid for the other)
• Impose minimum prices on different
distributors such as shops
• Agree with competitors what purchase price
it will offer suppliers
• Cut prices below cost in order to force a
smaller or weaker competitor out of the
market
• Advertising in the UK is regulated by
the Advertising Standards Authority,
which regulates advertising across all
media, including TV, internet, sales
promotions and direct marketing. The
ASA’s role is to ensure ads are legal,
decent, honest and truthful by
applying the Advertising Codes.