by Services refer to intangible activities or benefits provided by one party to another, typically in exchange for payment. Unlike physical goods, services cannot be seen, touched, or stored, as they are produced and consumed simultaneously. They are characterized by intangibility, variability, inseparability, and perishability. Common examples include healthcare, education, banking, hospitality, and consulting. Services play a vital role in the economy by fulfilling needs and enhancing convenience, comfort, and efficiency for customers. Businesses offering services focus on quality, customer satisfaction, and relationship management to remain competitive, as service delivery often involves human interaction and personalized experiences.
Key difference between Product and Services
| Basis of Comparison | Product | Service |
|---|---|---|
| Definition | Tangible offering | Intangible offering |
| Tangibility | Physical | Non-physical |
| Storage | Can be stored | Cannot be stored |
| Ownership | Ownership transferable | Ownership not transferable |
| Production | Separate from consumption | Simultaneous with consumption |
| Perishability | Non-perishable (in most cases) | Highly perishable |
| Standardization | Can be standardized | Difficult to standardize |
| Customer Interaction | Minimal interaction required | High level of interaction |
| Quality Measurement | Easily measurable | Difficult to measure |
| Returnability | Can be returned | Cannot be returned |
| Customization | Limited customization | High customization possible |
| Involvement of Customer | Low involvement | High involvement |
| Inventory | Maintainable | Not maintainable |
| Production Process | Capital-intensive | Labor-intensive |
| Example | Mobile phone | Internet subscription |
Unique Characteristics of Services:
- Intangibility
Services are intangible, meaning they cannot be seen, touched, or physically possessed before purchase. Customers rely on trust and past experiences to evaluate service quality. For example, in healthcare or education, customers cannot assess the service’s outcome until after it has been delivered. To reduce uncertainty, service providers often focus on building a strong brand, maintaining service consistency, and offering tangible cues like well-maintained facilities.
- Inseparability
Services are produced and consumed simultaneously, making them inseparable from the service provider. Unlike goods, which can be manufactured and stored for later use, services require the direct involvement of customers during the delivery process. For instance, in a restaurant, the dining experience is created through the interaction between customers and staff. Therefore, employee behavior, skills, and attitudes are critical to service quality.
- Variability
Since services involve human participation, they are inherently variable. The quality of service may vary based on who provides it, when, where, and how it is delivered. For example, the same hotel may offer different levels of service depending on the staff’s mood or workload. To minimize variability, companies invest in employee training, standardized procedures, and performance monitoring.
- Perishability
Services cannot be stored, saved, or returned. Once a service opportunity is lost, it cannot be recovered. For example, an unfilled airline seat or a hotel room for a specific day cannot be sold later. Due to perishability, service providers must carefully manage demand and supply. Strategies such as differential pricing, advance booking, and peak-time promotions help manage demand fluctuations.
- Ownership
Services do not result in ownership of a tangible product. Instead, customers gain access to or experience the benefits of the service. For instance, when using a car rental service, the customer pays for temporary use of the vehicle rather than owning it. This makes customer satisfaction a critical aspect of service delivery.
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Customer Involvement
In most services, customers play an active role in the service delivery process. Their behavior, expectations, and interactions can influence the outcome. For example, in fitness training, the trainer’s guidance combined with the customer’s effort determines success. High customer involvement requires clear communication and personalized attention.
- Lack of Transferability
Since services are consumed at the point of production, they cannot be transferred from one location to another. A haircut or a dental treatment cannot be delivered remotely. This characteristic emphasizes the need for service providers to be physically present in multiple locations to cater to different customer bases.
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High Importance of Relationships
In service industries, customer relationships are paramount. Since services are often consumed repeatedly, building trust, rapport, and loyalty becomes essential for long-term success. For example, personal care services like salons thrive on repeat customers and word-of-mouth referrals, making relationship management a critical aspect of business operations.
Classifications of Services:
Services can be classified into different categories based on various criteria, including the nature of service, the type of customer interaction, the degree of tangibility, and the industry they belong to.
1. Based on Tangibility
- High Tangibility Services: These services have a tangible component that accompanies the intangible service. For example, a meal in a restaurant includes both the tangible product (food) and the intangible service (ambience, service by staff).
- Pure Intangible Services: These services are entirely intangible, such as legal consultancy, education, or financial advising.
2. Based on the Nature of Service
- Consumer Services: These are services provided directly to individual consumers to satisfy their personal needs. Examples include healthcare, entertainment, and personal grooming.
- Business Services: These services cater to the needs of businesses and organizations, such as consulting, IT services, and logistics.
3. Based on Relationship with Customers
- Continuous Services: These involve an ongoing relationship with the customer, such as banking, insurance, and internet services.
- Discrete Services: These are provided on a one-time basis, such as repair services or event catering.
4. Based on Customization
- Standardized Services: These services follow a uniform approach for all customers, with minimal customization. Examples include airline travel and fast food restaurants.
- Customized Services: These are tailored to meet the specific needs of individual customers, such as luxury travel packages or personalized fitness training.
5. Based on Mode of Delivery
- People-Based Services: These require direct interaction between the service provider and the customer. Examples include teaching, personal care, and medical services.
- Equipment-Based Services: These services are delivered with minimal human intervention, relying on technology or equipment. Examples include ATM services and automated car washes.
6. Based on Skill and Expertise
- Professional Services: These require specialized knowledge and training, such as legal, medical, and financial services.
- Non-Professional Services: These do not require high levels of expertise or specialization, such as housekeeping or delivery services.
7. Based on Sector
- Public Services: These are provided by the government or public sector organizations to serve the community, such as public transportation, education, and policing.
- Private Services: These are offered by private businesses for profit, such as private healthcare, hotels, and entertainment.
