Services Meaning and Characteristics

A service is an act or performance offered by one party to another. Although the process may be tied to a physical product, the performance is essentially intangible and does not normally result in ownership of any of the factors of production.

Services are economic activities that create value and provide benefits for customer’s specific times and places, as a result of bringing about a desired change in or on behalf of the recipient of the service. Service is those separately identifiable, essentially intangible activities which provide want-satisfaction, and that are not necessarily tied to the sale of a product or another service. To produce a service may or may not require the use of tangible goods. However when such use is required, there is no transfer of title (permanent ownership) to these tangible goods.

One common method of defining a service is to distinguish between the ‘core’ and ‘peripheral’ elements of that service. The ‘core’ service offering is the ‘necessary outputs of an organisation which are intended to provide the intangible benefits customers are looking for’. Peripheral services are those which are either ‘indispensable for the execution of the core service or available only to improve the overall quality of the service bundle.

Services include all economic activities whose output is not a physical product or construction, is generally consumed at the time it is produced, and provides added value in forms (such as convenience, amusement, timeliness, comfort or health) that are essentially intangible concerns of its first purchaser.

Examples of services are:

Transportation & public utilities, Hotels and other lodging places, Rail-road transportation, Personal services, Local and inter-urban passenger transit, Business services, Trucking and warehousing, Auto repair, services and garages, Water transportation, Miscellaneous repair services, Air transportation, Motion pictures, Pipelines except natural gas, Amusement and recreation services, Health service, Communication, Legal services, Telephone and telegraph, Educational services, Radio and television broadcasting, Social services and membership organizations, Electricity, Gas, Sanitary services, Miscellaneous professional services, Wholesale trade, Private household services, Retail trade, Finance, insurance, and real estate, Banking, Military, Credit agencies other than banks, Government enterprises Security & commodity brokers, Local government, Real estate, Education, Holding and other investment companies and Other services.

Characteristics of Services

1. Perishability

Service is highly perishable and time element has great significance in service marketing.

Service if not used in time is lost forever. Service cannot stored.

2. Fluctuating Demand

Service demand has high degree of fluctuations. The changes in demand can be seasonal or by weeks, days or even hours. Most of the services have peak demand in peak hours, normal demand and low demand on off-period time.

3. Intangibility

Unlike product, service cannot be touched or sensed, tested or felt before they are availed. A service is an abstract phenomenon.

4. Inseparability

Personal service cannot be separated from the individual and some personalised services are created and consumed simultaneously.

For example hair cut is not possible without the presence of an individual. A doctor can only treat when his patient is present.

5. Heterogeneity

The features of service by a provider cannot be uniform or standardized. A Doctor can charge much higher fee to a rich client and take much low from a poor patient.

6. Pricing of Services

Pricing decision about services are influenced by perishability, fluctuation in demand and inseparability. Quality of a service cannot be carefully standardized. Pricing of services is dependent on demand and competition where variable pricing may be used.

7. Service quality is not statistically measurable

It is defined in form of reliability, responsiveness, empathy and assurance all of which are in control of employee’s direction interacting with customers. For service, customers satisfaction and delight are very important. Employees directly interacting with customers are to be very special and important. People include internal marketing, external marketing and interactive marketing.

The future of the services sector

There are the likely trends in the service sector for the different kinds of services.

1. Old Services

Demand will continue to fall (e.g. public transport, laundries). However because these services have a fairly small share in service consumption and output they will have little influence upon services as a whole.

2. New Services

Demand will be fairly close to the trend of output and income in the overall economy (e.g. health, education, tourism). Private consumer demand for leisure and recreation-related services may tend to increase faster than personal income if the economy is growing.

The resources devoted to new services that are publicly provided (e.g. health and education) will be influenced by political decisions. The complexion of the government in office will clearly influence what share of resources will be devoted to public services, although this decision in turn will be influenced by factors like the general health of the economy and general demographic trends (e.g. the increasing numbers of old people).

3. Complementary Services

Demand for these will be influenced by the health of the sectors which use them. If the fortunes of the manufacturing sector improve then intermediate services will grow (e.g. computing, finance, research). If on the other hand manufacturing continues to stagnate, then intermediate services will suffer too. Generally they have growth faster than manufacturing in the past but it is unlikely that under stagnant conditions in the 1980s they could continue to enjoy such exceptional growth.

As far as internationally traded services are concerned (e.g. tourism, financial services) their growth is less constrained and could continue to develop but would be particularly influenced by two factors:

• Competition
• Exchange Rates