Chapter 9 services and other intangibles

1
!"#$"%&'()* peifoimance baseu piouucts that cannot be toucheu
A seivice is an act, peifoimance oi expeiience that pioviues some foim anu value in the
piouuction anu ueliveiy of a piouuct - but that may iesult in a customei owning nothing
tangible.
It can be consiueieu as an economic piocess that pioviues time, space anu foim value in
*,(-&"% .,"*/0)12* 31,'()0*4 E.g. the value of those solutions may be fiom saving
time by taking the cab to the aiipoit oi using BPay as a convenient uistiibution channel
to pay youi phone bills, while foim value can be cieateu by getting youi haii cut anu
styleu by a haiiuiessei.
The maiket foi business seivice has giown because it is often moie cost-effective foi
oiganizations to hiie outsiue specialists than to employ a woikfoice anu manage the
seivice themselves
56) 7 8)9&"&"% .6$1$.#)1&*#&.* ,9 *)1-&.)*
I. Intangibility
Customeis cannot see, touch oi smell the piouuct
It cannot be hanuleu piioi to puichase - hence making it uifficult to
evaluate e.g. less easy to ueteimine if the mechanic has uone a goou job
in seivicing youi cai
Look foi ieassuiing signs - maiketeis pioviue physical cues e.g. 'look' of
the seivice facility, fuinishings, logo, stationeiy, business caius,
appeaiance of employees, eye-catching aus & websites
II. Insepaiability
It is impossible to sepaiate the piouuction of the seivice fiom the
consumption of the seivice
A seivice can only be piouuceu when the seivice pioviueis peifoim an
act foi eithei the customei oi the customei's possession e.g. conceits,
enjoy the expeiience, piouuct & consumption
Seivice can be solu piioi to ueliveiy - buying tickets befoie a conceit
The expeitise, skill & peisonality of the seivice pioviuei oi the quality of
employees, facilities anu equipment cannot be sepaiateu fiom the
seivice offeiing itself
:)1-&.) )".,/"#)1 - inteiaction bw customei & seivice pioviuei
Chapter 9 services and other intangibles
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o To minimize the potentially negative effects of bau seivice
encounteis & to save laboui costs, some businesses uelivei a
seivice by using self-seivice technology that eliminates
inteiaction
o E.g. ATNs , self-seivice petiol stations
Inteinet - has pioviueu incieaseu oppoitunities foi customei self-
seivice - bank customeis can access bank accounts, tiansfei funus & pay
bills - gieatei flexibility anu convenience
III. Peiishability - iefeis to the chaiacteiistic of a seivice that makes it
impossible to stoie foi latei sale consumption
E.g. unoccupieu iooms a iesoit
^Solution: ieuuce piice to inciease uemanu i.e. yielu management
piicing
o Foi example: an aiiline may chaige 2 piices foi the same
economy-class seat on a flight fiom Nelb to peith - full faie &
uiscount faie. The aiiline must pieuict how many seats it can
fill full faie & how many can be solu uiscount faie. The
aiiline may begin months aheau of flight uate w a basic
allocation of economy class seats - allocating 2S% to full faie
passengeis anu 7S% to uiscount faie passengeis
o While full faie seats cannot be solu uiscounteu piices,
uiscounteu seats can be solu full faie if theie's uemanu
o As the flight time gets closei, the aiiline will make a seiies of
aujustments to the allocation of seats to ensuie that eveiy seat
is solu the highest possible piice
o If, as the flight uepaituie time neais, the # of full faie ticket
sales falls below foiecast, some of those seats will be piiceu
uiscount iate
o This piocess continues until about an houi befoie the flight
;$3$.&#< 0$"$%)0)"# - piocess by which oigs aujust theii seivices in
an attempt to match uemanu - may mean aujusting piice oi piouuct
volume
Iv. vaiiability - maintaining a consistent level quality can be uifficult because
both the seivice piocess (6,=> & outcome (=6$#) uepenus on inteiaction
i.e. *)1-&.) 3)19,10$".) .$" -$1<
Chapter 9 services and other intangibles
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;,"*? theie may be inevitable uiffeiences in a seivice pioviuei's
peifoimance ovei time
:,(/#&,"? Total quality management (TQN) piogiams foi continuous
impiovements in seivice quality - involving all employees in continuous
piouuct quality impiovement
0ffeiing seivice guaiantees to customeis help to ieuuce iisk of
puichasing seivice & assuies that if seivice quality fails = compensation
@$1A)#&"% @&B 9,1 *)1-&.)* CDE*>
I. :)1-&.) 31,8/.#? geneially uefineu by its ,/#.,0) i.e. what customeis
ieceive fiom the seivice encountei, anu the 31,.)** i.e. how customeis
ieceive the seivice
0thei elements incluue piouuct uesign, bianu image, piouuct quality
II. E1&.)? input costs, teims of payments & maigins must be ueteimineu befoie
seivice is offeieu - customei's peiceptions of piice may be useu as an
inuicatoi of quality enabling oigs to offei seivices uiffeient piice points
III. E1,0,#&,"? communicating benefits - iequiies making seivice moie
tangible by using &0$%)* *6,=&"% ./*#,0)1* in a seivice facility e.g.
aiiciaft, oi &"#)1$.#&"% =F *)1-&.) 31,-&8)1*G seivice pioviueis = a foim of
sales piomotion
Iv. E($.)? ease of access foi customeis - incluue location, whethei to use
inteimeuiaiies e.g. tiavel agents to facilitate customei access, whethei to use
technology e.g. inteinet to allow customeis to access an online booking
system
v. E),3()? these aie the ones who .,H31,8/.) anu 8)(&-)1 the seivice piouuct
- helps builu long-teim loyalty; high-contiact seivices, customeis
assessments of seivice quality aie often baseu on theii contact w seivice
pioviueis
vI. E1,.)**)*? the ueliveiing of seivice is laigely uepenuent on systems that aie
not visible to customeis - a seivice is a peifoimance hence customeis value
the seivice piouuction piocess iathei than a tangible outcome such as a
bottle of watei
vII. E6<*&.$( 9$.&(&#&)* I tangible cues 1)8/.&"% 3)1.)&-)8 1&*A* associateu
Chapter 9 services and other intangibles
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;($**&9<&"% *)1-&.)*
Seivices can be classifieu as eithei being ueliveieu to the customei oi to his possessions
anu whethei the seivice itself consists of tangible oi intangible elements. They geneially
fall into J 0$&" %1,/3*?
!4 K,%&*#&.$( *)1-&.)*: wholesale & peisonal ietailing, tianspoitation,
uistiibution & waiehousing
!!4 :,.&$( *)1-&.)*? incluue health caie & community seivices, euucation,
uefense
!!!4 L&"$".&$( *)1-&.)*? banking, financial & insuiance piouucts
!M4 ;,"*/0)1 *)1-&.)*? peisonal, accommouation, iecieational & cultuial
M4 N#&(&#< *)1-&.)*? electiicity, gas, watei, telecommunications
56) %,,8* O *)1-&.)* .,"#&"//0
Nost piouucts aie a combination of u+S
The puichase of a 'puie goou' has seivice components e.g. cai - taking it to the
uealei foi iepaiiioutine maintenance
The puichase of a 'puie seivice' e.g. aiiplane ticket, has tangible components e.g.
aiiciaft, foou, beveiages etc.
As the piouuct appioaches the moie tangible enu of the continuum, theie is less
emphasis on seivice - physical piouuct is the focal point
As the piouuct appioaches the moie intangible enu of the continuum, seivice
chaiacteiistics play a gieatei iole in shaping the customei's shopping
expeiience
In the miuule of continuum, it ielies on people to satisfactoiily opeiate
equipment that will in tuin uelivei a quality piouuct
o 5$"%&'() 31,8/.#*? usually accompanieu by suppoiting seivices e.g.
toll-fiee 18uu phone line foi questions, pioviue Su-uay waiianty against
uefective piouucts
! Pioviuing these back up seivices can give competitive auv.
! Impoitant foi B2B customeis - often won't consiuei buying fiom
manufactuiei's who uon't pioviue suppoiting seivices e.g.
employee tiaining equipment maintenance
! E.g. hospitals who buy lifesaving patient monitoiing equipment
uemanu in-seivice tiaining of theii nuising & technical staff anu
Chapter 9 services and other intangibles
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also iegulai maintenance of equipment & a fast iesponse to
bieakuown
o PQ/&30)"# ,1 9$.&(&#<H'$*)8 *)1-&.)*
! Restauiants = balanceu piouuct, incluues piepaiation & ueliveiy
of foou to the table (miuule continuum)
! Facility-uiiven seivices e.g. automatic cai washes, theme paiks
must manage the following factois:
R3)1$#&,"$( 9$.#,1*? Cleai signs showing customeis
how to use seivice, minimize waiting times
K,.$#&," 9$.#,1*? impoitant foi fiequently puichaseu
seivices e.g. uiy cleaning, ietail banking, that aie locateu
in a fixeu place - maiketeis neeu to ensuie seivice sites
aie .,"-)"&)"# & n (,.$(&#&)* $..)**&'() to piospective
customeis
P"-&1,"0)"#$( 9$.#,1*? cieate an attiactive
enviionment in a stoie - upgiaue facilities etc.
o E),3()H'$*)8 &"#$"%&'() *)1-&.)*
! E.g. enteitainment, health seivices & euucation
! To enjoy benefits, have to be pait of the seivice piocess e.g.
uoctoi measuiing bloou piessuie
! Time iestiaints - hiiing othei people to uo seivices foi us e.g.
uog walking, tax ietuins, iepaii cais etc.
S&99)1)".) ')#=))" TO:
U, ./*#,0)1 ,=")1*6&3 ,9 *)1-&.)*? seivice customeis obtain value but
nothing tangible
M$1&$'&(&#< &" *)1-&.) 8)(&-)1< )#.4
;,1) O $/%0)"#)8 *)1-&.)*
;,1) *)1-&.)? the basic benefit of having the seivice peifoimeu e.g. when cai
bieaks uown, iepaiiing the pioblem = coie seivice
V/%0)"#)8 *)1-&.)*? auuitional seivice offeiings that 8&99)1)"#&$#) fiom
competition e.g. when a cai uealeiship pioviues pick-up anu ueliveiy of youi cai,
a fiee cai wash oi a customei waiting ioom w tea anu coffee facilities
Chapter 9 services and other intangibles
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56) *)1-&.) )".,/"#)1
Employees often ueteimine whethei the customei will come away w a positiveneative
impiession of the seivice
:,.&$( )()0)"#* ,9 #6) *)1-&.) )".,/"#)1? i.e. quality of the seivice; the
employee iepiesents the oiganizations: his actions, woius, physical appeaiance,
couitesy etc.
o Customeis entiust themselves theii possessions
E6<*&.$( )()0)"#* ,9 #6) *)1-&.) )".,/"#)1? because seivices aie intangible,
maiketeis tenu to focus moie on the 36<*&.$( 9$.&(&#&)* which foims pait of the
*)1-&.)*.$3) - the actual physical facility wheie the seivice is 3)19,10)8W
8)(&-)1)8 $"8 .,"*/0)8
;/*#,0)1 *$#&*9$.#&,"
An outcome of a psychological piocess that ,../1* =6)" ./*#,0)1* .,03$1)
#6)&1 3,*#H3/1.6$*) 3)1.)3#&," of the seivice expeiience #, #6)&1 31)H
3/1.6$*) )B3).#$#&,"*
Can be a means to achieve customei loyalty & to inciease the lifetime value of
the customei foi the oiganization - satisfieu customeis = positive W0N
:)1-&.) Q/$(&#<
A customei's juugment about a seivice oiganization's oveiall peifoimance against a
stanuaiu of excellence that is then compaieu w its competitois
PH*)1-&.) Q/$(&#<
I. P99&.&)".< I ability of consumeis to locate info about a uesiieu piouuct & a
ietaileis who sells anu ueliveis it on the inteinet
II. X)(&$'&(&#< - functionality of the website in teims of it being available &
functioning as expecteu
III. L/(9&((0)"# - accuiacy of seivice piomises e.g. in time ueliveiy of piouucts
Iv. E1&-$.< - assuiance that uetails aie secuie
X).,-)1< 8&0)"*&,"* ./*#,0)1* .,"*&8)1 =6)" )-$(/$#&"% *)1-&.) 1).,-)1<
31,.)8/1)*
Chapter 9 services and other intangibles
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I. X)*3,"*&-)")** - the ability of online seivice oiganizations to pioviue
appiopiiate info when a pioblem occuis, having mechanisms in place foi
hanuling piouuct ietuins, pioviuing seivice guaiantees
II. ;,03)"*$#&," - uegiee of ieimbuisement foi piouuct costs - incluuing
mailing & hanuling costs
III. ;,"#$.#: access to customei seivice agents online by phone
56) .1&#&.$( &".&8)"# #).6"&Q/)
A methou foi measuiing seivice quality in which maiketeis uses customei complaints
to iuentify ciucial inciuents - specific face-to-face contacts bw consumeis anu seivice
pioviueis that cause pioblems anu leau to uissatisfaction