1-1

What are services?

Advertising Museums
Education Insurance
Placements Tax Consultants
Police Lawyers Pubs
Communication Saloons Home Tutors
Cinema Real Estate
Health Cybercafe Restaurants
Theatre Fast Food
Travel Agent Finance
Management Consultants Tourism Disco
Ambulance Transportation
Monday,
August 2
Slide
#1

Entertainment 9, 2022

Event Management
 1-2

Introduction
• Gronroos(1960) defines service as “An activity or series of activities
of more or less tangible nature that normally , but not necessarily,
take place in interactions between the customer and service
employees and/or physical resources or goods and/or systems of the
service provider.

• Kotler(1991) defines services as “Any act or performance that one

party can offer to another that is essentially intangible and does not
result in the ownership of anything. Its production may not be tied to
a physical product”

• Zeithamal et al. (2006) defined it as “ an act pr performance offered

by one party to other. Although the process may be tied to a physical
product, the performance is transitory, often intangible in nature and
does not normally result in ownership of any of the factors of
production.
 1-3

 A Service is a time-perishable, intangible experience performed for a

Customer at times acting in the role of a co-producer.

 Therefore, services can be defined as ‘a set of activities or benefits

which produce a product , which is normally intangible in nature,
perishable, involving temporary transfer of ownership or s long as the
service is being used and which gratify the customer needs or problems.

 Services may be defined as intangible activities performed by persons

or machines or both for purpose of creating value perceptions among
customers.
 Services can also be provided in connection with sale of tangible goods
for creating value perceptions among customers
 1-4

Tangibility elements in various

service sector
Higher intangible Higher tangible content
content
Teaching Cosmetics
Consulting Detergents
Financial Investment Furniture
Hospitality It equipment
Sugar
 1-5

Example of service
 1-6

Characteristics of Services
 Zeithaml et al.(1985) identified four characteristics of services.
 Intangibility
 Inseparability
 Variability
 Perishability
 1-7

Intangibility
 Services cannot be touched
 Services are “experiences” created for customers. They comprise
actions rather than objects.
 Cannot be easily communicated i.e they can not be seen, felt, tasted
or touched in the same manner in which goods can ne touched
 Consumer suspects due to absence of concrete evidences
 It results in following implications
 Services can not be stored
 Services cannot be patented legally hence they can easily be copied
 Services cannot be readily displayed or easily communicated leading to
difficulty in assessing its quality
 Pricing services is difficult as it is hard to determine the actual cost of a unit
of service and price/quality relationship is complex
 1-8

Inseparability (simultaneity)
 Services cannot be separated from the provider
 Services are created(by the provider) and consumed (by the
client/user) simultaneously and cannot be stored like goods.
 Customers have to be present during service production.
 A service must be provided at the right time, in the right place and
in the right way
 Mass production becomes difficult
 Customer's experience depends upon the action of employees and
interaction between employees (service provider) and customers.
 Operations need to be decentralized so that the service can be
delivered directly to consumers at convenient locations
 1-9

Variability (heterogeneity)
 Services produced at different times can be different
 Limited scope for standardization
 Difficulty in setting quality controls
 Not possible what exactly is the customer going to receive?
 Quality can be determined only after the service is consumed
 1-10

Perishability (Inventory-less-ness)
 Services can not be stored for future use
 Storage of services in not possible.
 Short lived value of services
 Services cannot be inventoried
 Capacity of service is finite.
 Matching demand with capacity is a problem
 1-11

Service as a process
 A process involves the conversion of an input into an output.
 In services, two broad categories-people and objects-are
processed.
 Service is categorized in four broad groups:-
 People processing:- This involves noteworthy actions directed

towards people, in particular, the bodies of persons, such as

hair cut, surgery etc. here customers must enter the service
factory/location where service providers (people. machines or
both) deliver the service benefit to them..
 Sometimes service providers, come to the customers along

with their tools to provide the desired benefits at locations

of customers’ choice.
 1-12

Service as a process
 Possession processing:- This includes concrete actions to physical goods
belonging to customers .In this customer need not be present, but objects
requiring processing must be present. Eg:- warehousing, laundry etc. many
such activities are quasi-manufacturing operations and does not involve
simultaneous production and consumption.

 Mental stimulus processing:- The kind of service focuses on intangible

actions directed at the minds of people. It includes education, news,
entertainment, sports, theatre etc. In such instances customers must be
present mentally but could be physically located either in a specific service
facility, or in a remote place connected by broadcast signal.
 Information processing.:- This describes indistinguishable actions directed
at the customer’s belonging or assets. In services sectors such as insurance
and banking, little direct contact is needed with the customer, once the
request for service has been set in motion.
 1-13

Service as a process
 Information processing.:- This describes indistinguishable
actions directed at the customer’s belonging or assets. In
services sectors such as insurance and banking, little direct
contact is needed with the customer, once the request for
service has been set in motion.
 Difference between Goods and 1-14

Services
Criteria's Goods Services

Goods are produced Services are performed

Nature Goods are tangible and Services are intangible and

homogenous in nature heterogenous in nature

Essence Goods are physical thing and Services are more like a
involves production process

Core Value It is produced in a firm or It is produced at the time of

manufacturing unit or factory buyer ad seller interaction

Participation Customers don’t participate in Customers participate in the

production process of goods production process of service.

Inventory Goods can be kept in stock for Service cannot be kept in

future sales, inventory of goods stock, inventory of services is
is possible not possible
 Difference between Goods and 1-15

Services
Criteria's Goods Services
Ownerships Transfer of ownership of the title Transfer of ownership of
is possible in case of goods the title is not possible in
case of services

Consumption In case of goods, production and In case of services,

distribution can be separated production, distribution
from consumption and consumption occur at
a same point of time.
Quality The quality of product can be The quality of service
measured and compared with cannot be measured
other products
Returns Goods purchased can be Services bought can not
returned if not satisfied and can be returned but, in some
get refund cases, can get refund
1-16
 1-17

Classification of Services
1) Classification of service based on tangible action
 1-18

Wherever people or products are involved directly, the

service classification can be done based on tangibility.
a) Services for people – Like Health care, restaurants
and saloons, where the service is delivered by people
to people.
b) Services for goods – Like transportation, repair
and maintenance and others. Where services are
given by people for objects or goods.
 1-19

Classification of Services
2) Classification of services based on intangibility
 1-20

 There are objects in this world which cannot be tangibly

quantified. For example – the number of algorithms it takes to
execute your banking order correctly, or the value of your life
which is forecasted by insurance agents. These services are
classified on the basis of intangibility.
a) Services directed at people’s mind – Services sold through
influencing the creativity of humans are classified on the
basis of intangibility.

b) Services directed at intangible assets – Banking, legal

services, and insurance services are some of the services most
difficult to price and quantify.