Characteristics of Services

In the following, we will go into the most relevant characteristics of services. Characteristics
of services apply universally to any service. The most important characteristics of services
are:

▪ Lack of ownership
▪ Intangibility
▪ Inseparability
▪ Variability
▪ Perishability
▪ User participation
Lack of Ownership – Characteristics of Services
Lack of ownership may be one of the most obvious ones of the characteristics of service. It
refers to the fact that you cannot own and store a service like you can a product. This
characteristic is strongly linked to several other characteristics of services, such as
intangibility, perishability, inseparability.

Intangibility – Characteristics of Services

When thinking about the characteristics of services, intangibility may come to your mind
first. Service intangibility means that services cannot be seen, tasted, felt, heard or smelled
before they are bought. You cannot try them out. For instance, airline passengers have
nothing but a ticket and a promise that they will arrive at a certain time at a certain
destination. But there is nothing that can be touched.

Inseparability – Characteristics of Services

Characteristics of services include inseparability, which means that services are produced and
consumed at the same time. This also entails that services cannot be separated from their
providers. Contrary to services, physical goods are produced, then stored, later sold, and even
later consumed. Services are first sold, then produced and consumed at exactly the same time.
A product can, after production, be taken away from the producer. However, a service is
produced at or near the point of purchase. For instance, when visiting a restaurant, you order
your meal, the waiting and delivery of the meal, the service provided by the waiter/ress etc.
All these parts, including the providers, are part of the service and therefore inseparable. In
services marketing, a service provider is the product.

Variability – Characteristics of Services

Variability does also belong to the important characteristics of services. It refers to the fact
that the quality of services can vary greatly, depending on who provides them and when,
where and how. Because of the labour-intensive nature of services, there is a great deal of
difference in the quality of service provided by various providers, or even by the same
providers at different times.

Perishability – Characteristics of Services

Perishability means that services cannot be stored for later sale or use. In other words,
services cannot be inventoried. This is one of the most significant characteristics of services,
since it may have a major impact on financial results. Doctors or dentists often charge
patients for missed appointments because the service value has foregone. The value existed
only at that particular point and disappeared when the patient did not come. When demand is
steady, the perishability of services is not a problem. However, in case of fluctuating demand,
service firms can have difficult problems. For this reason, transport companies own much
more equipment than they would if demand were even throughout the day: the demand
during rush-hours needs to be served at that specific time, it cannot be served later or earlier.
Consequently, service companies use various techniques for creating a better match between
demand and supply: Demand shifting.

User participation – Characteristics of Services

Finally, the characteristics of services include user participation. Indeed, users participate in
every service production. Even when the user is not required to be at a location where the
service is performed, users participate in every service production. A service cannot be
separated from its provider, but neither can it be separated from its user.

The Services Marketing Triangle

The Services Marketing Triangle is shown in the following diagram. It shows the key
marketing activities that happen between the key actors within services businesses.
Each actor works together to develop, promote, and deliver a company’s service. As you can
see from the diagram we represent actors by the points of the triangle. Our actors are:

• Company: refers to the leadership team of the company in question.

• Employees: refers to all employees, including subcontractors who deliver the
company’s service.
• Customers: refers to all customers and potential customers of the company.
The lines between the points show the different types of marketing that must occur:

• External Marketing: occurs between the company and its customers.

• Internal Marketing: occurs between the company and its employees.
• Interactive Marketing: occurs between the employees and the customers.

External Marketing

Companies use external marketing to make promises to customers. External marketing is any
communication to customers (or potential customers) that happens before service delivery
starts.
Forms of external marketing include:

• Advertising

• Personal selling

• Public relations (PR)

• Direct marketing

We use external marketing to achieve many aims including:

• Creating awareness.

• Setting price expectations.

• Setting service level expectations.

• Informing customers if any prerequisites that must be in place before they can use the
service.

Internal Marketing

Within a services business, we view employees as internal customers. They are a market
which we must please first as a company. The leadership team should be focused on
satisfying its employees so that they want to better serve customers.

Internal marketing involves motivating employees to work as a team to make customers

satisfied. This is obviously true for customer service representatives. It can equally be applied
to all employees. This results in everyone, at all levels of the organization, being empowered
to deliver great customer service.

Key components of internal marketing include:

• Motivating employees

• Teaching customer satisfaction techniques

• Communicating company goals regularly

• Management of change

• Training staff on how to use the company’s services

• Good pay and working conditions

Interactive Marketing

Interactive marketing occurs when employees and customers interact. It is here where the
promises made during external marketing are either kept or broken by employees or sub-
contractors.

Each significant interaction between an employee and a customer is known as a service

encounter.
Interactive marketing is important because it establishes both short-term and long-term
satisfaction. That is, if the customer is satisfied with the service they received in the short-
term, they are more likely to be satisfied over the longer term.

The Services Marketing Mix

Extending the 4Ps

The services marketing mix is an extension of the 4Ps framework. The essential elements of
product, promotion, price and place remain but three additional elements – people, physical
evidence and process are included to the 7Ps mix. The need for the extension is due to the
high degree of direct contact between service providers and its customers, the highly visible
nature of the service process, and the simultaneity of the production and consumption.
Although it is possible to discuss people, physical evidence and process within the 4P
framework (for example, people can be considered part of the product offering), this
extension allows for a more thorough analysis of the marketing elements necessary for
successful services marketing.

Product

In the case of services, the “product” is intangible, heterogeneous and perishable. Moreover,
its production and consumption are inseparable. Hence, there is scope for customizing the
offering as per customer requirements, and the actual customer encounter therefore assumes
particular significance. However, too much customization would compromise the standard
delivery of the service and adversely affect its quality. Therefore, particular care has to be
taken in designing the service offering.

Pricing

Pricing of services is tougher than pricing of goods. While the latter can be priced easily by
taking into account the raw material costs, in the case of services there are attendant costs–
such as labor and overhead costs–that also need to be factored in.
A restaurant not only has to charge for the cost of the food served but also has to calculate a
price for the ambiance provided.

Place

Since service delivery is concurrent with its production and cannot be stored or transported,
the location of the service product assumes importance. Service providers have to give
special thought as to where the service is provided. A fine dining restaurant is better located
in a busy, upscale market as opposed to the outskirts of a city. A holiday resort is better
situated in the countryside away from the rush and noise of a city.

Promotion

Since a service offering can be easily replicated, promotion becomes crucial in differentiating
a service offering in the mind of the consumer. Service providers offering identical services
such as airlines or banks and insurance companies invest heavily in advertising their services.
This is crucial in attracting customers in a segment where the services providers have nearly
identical offerings.

People

People are a defining factor in a service delivery process, since a service is inseparable from
the person providing it. A restaurant is known as much for its food as for the service provided
by its staff. The same is true of banks and department stores. Consequently, customer service
training for staff has become a top priority for many organizations today.

Process

The process of service delivery is crucial since it ensures that the same standard of service is
repeatedly delivered to the customers. Most companies have a service blue print which
provides the details of the service delivery process, often going down to even defining the
service script and the greeting phrases to be used by the service staff.

Physical Evidence

Since services are intangible in nature, most service providers strive to incorporate certain
tangible elements into their offering to enhance customer experience. Many hair salons have
well designed waiting areas, often with magazines and plush sofas for patrons to read and
relax while they await their turn. Similarly, restaurants invest heavily in their interior design
and decorations to offer a tangible and unique experience to their guests.

The Gap Model of Service Quality

The diagram below shows a visual representation of the Gap Model of Service Quality.
To use the model, an organization should measure each of these gaps and then take steps to
manage and minimize each gap. Let’s examine each of the five gaps in turn.

Gap 1: Knowledge Gap

The knowledge gap is the difference between the customer’s expectations of the service and
the company’s provision of that service.

Essentially, this gap arises because management doesn’t know exactly what customers
expect. There are a number of reasons this could happen, including:
• Lack of management and customer interaction.
• Lack of communication between service employees and management.

• Insufficient market research.

• Insufficient relationship focus.

• Failure to listen to customer complaints.

Example:
If Netflix were to suffer from this gap then it could be because they don’t offer the right
amount of newer titles to their customer. If Pizzahut were to suffer from this gap then it could
be because they don’t offer pecan pie. In both cases, customers expect these things but
they simply aren’t offered.

Gap 2: The Policy Gap

The policy gap is the difference between management’s understanding of the customer needs
and the translation of that understanding into service delivery policies and standards.

There are a number of reasons why this gap can occur:

• Lack of customer service standards.

• Poorly defined service levels.

• Failure to regularly update service level standards.
Example:
If Netflix were to suffer from this gap then it could be that they offer all the right shows but
the streaming quality level isn’t high enough. If Pizzahut where to suffer from this gap then it
could be they offer pecan pie but the quality isn’t as good as people expect.

This gap causes customers to seek a similar service elsewhere but with better service.

Gap 3: The Delivery Gap

The delivery gap is the difference between service delivery policies and standards and the
actual delivery of the service.

This gap can occur for a number of reasons:

• Deficiencies in human resources policies.

• Failure to match supply to demand.

• Employee lack of knowledge of the product.

• Lack of cohesive teamwork to deliver the product or service.

Example:
If Netflix were to suffer from this gap then it could be because when the customer selects the
show they want to watch it takes five minutes before it starts to play. In this case, the product
isn’t performing as it should.
If Pizzahut were to suffer from this gap then it could be that when the customer orders the
pecan pie they are informed that the kitchen has run out. In this case, supply hasn’t been
adequately matched to demand.

Gap 4: The Communication Gap

The communication gap is the gap between what gets promised to customers through
advertising and what gets delivered.

Again. there are a number of reasons why this can happen:

• Overpromising.

• Viewing external communications as separate to what’s going on internally.

• Insufficient communications between the operations and advertising teams.

Communication gaps lead to customer dissatisfaction. This happens because what they
receive isn’t what they were promised. In the worst case, it may cause them to turn to an
alternative supplier.

Example:
If Netflix were to experience this gap then it could be because that although the service is
good it isn’t as good or as easy to use as depicted in the advert. If Pizzahut were to suffer
from this gap then it could be because the pecan pie was good but it wasn’t as large or
delicious as it looked in the advert.

Gap 5: The Customer Gap

The customer gap is the difference between customer expectations and customer
perceptions. This gap occurs because customers do not always understand what the service
has done for them or they misinterpret the service quality.

Many organizations can be completely blind to this gap. This gap can happen because of one
of the other four gaps, or simply because the customer perceives the quality of the
service incorrectly. In a worst-case scenario, it could lead to a business losing a large
proportion of their customers overnight. Although the company thought there was no gap, the
reality was that their customers were just waiting for someone to fill their perceived gap.

From a marketing perspective, products and services can be separated into three useful classes:
search products, experience products, and credence products. Search products or services have
attributes customers can readily evaluate before they purchase. A hotel room price, an airline
schedule, television reception, and the quality of a home entertainment system can all be
evaluated before a purchase is made. Well-informed buyers are aware of the substitutes that
exist for these types of products and thus are likely to be more price sensitive than other buyers,
unless there exists some brand reputation or customer loyalty. This sensitivity, in turn, induces
sellers to copy the most popular features and benefits of these types of products. Price
sensitivity is high with respect to products with many substitutes, and since most buyers are
aware of their alternatives, prices are held within a competitive band.

Experience products or services can be evaluated only after purchase, such as dinner in a new
restaurant, a concert or theater performance, a new movie, or a hairstyle. The customer cannot
pass judgment on value until after he or she has experienced the service. These types of
products tend to be more differentiated than search products, and buyers tend to be less price
sensitive, especially if it is their first purchase of said product. However, since they will form
an opinion after the experience, if it is not favorable, no amount of differentiation will bring
them back. Product brand and reputation play an important role in experience products, due to
consistency of quality and loyalty. For instance, when customers travel, so does brand
reputation, as with airlines, hotels, rental cars, and so forth.

Credence products or services have attributes buyers cannot confidently evaluate, even after
one or more purchases. Thus, buyers tend to rely on the reputation of the brand name,
testimonials from someone they know or respect, service quality, and price. Credence products
and services include health care; legal, accounting, advertising, consulting, and IT services;
baldness cures; pension, financial, and funeral services; and even pet food (since you have to
infer if your pet likes it or not). Credence services are more likely than other types to be
customized, making them difficult to compare to other offerings. Because there are fewer
substitutes to a customized service and there is more risk in purchasing these types of services,
price sensitivity tends to be relatively low — that is, the majority of customers purchasing
credence services are relatively price insensitive compared to search or credence goods.

Service Encounter

Service encounters are transactional interactions in which one person (e.g., a vendor, office
clerk, travel agent) provides a service or good (e.g., a product, an appointment, airline tickets)
to another person.

Many different communicative acts are included in service encounters including, for
example, greetings, leave takings, requests, and offers. It is importatn to fully understand the
service encounter context in order to appropriately perform communicative acts. Many of the
pragmatic strategies addressed in the other modules still apply to the communicative acts
produced in service encounters; however, this unique service context warrants detailed
pragmatic exploration.

In this module, we will specifically address unique features of service encounters as well as
the pragmatic strategies used in this specific context. We will look at three specific
components of service encounters:

▪ Openings and Tone Setting

▪ Negotiating Service
▪ Closing the Interaction & Leave Taking