A service is any act or performance one party can offer to another that is essentially intangible

and does not resultin the ownership of anything. Its production may or may not be tied to a phys-
ical product. Increasingly, manufacturers, distributors, and retailers are providing value-added
services, or simply excellent customer service, to differentiatethemselves. Many pure service
firms are now using the Internet to reach customers; some operate purely online.

Categories of Service Mix

The service component can be a minor or a major part of the total offering. We distinguish five
categories of
offerings:
1. A pure tangible good such as soap, toothpaste, or salt with no accompanying services.
2. A tangible good with accompanying services, like a car, computer, or cell phone, with a war-
ranty or specialized customer service contract. Typically, the more technologically advanced the
product, the greater the need for high-quality supporting services.
3. A hybrid offering, like a restaurant meal, of equal parts goods and services. People patronize
restaurants for both the food and its preparation.
4. A major service with accompanying minor goods and services, like air travel with supporting
goods such as snacks and drinks. This offering requires a capital-intensive good—an airplane—
for its realization, but the primary item is a service.
5. A pure service, primarily an intangible service, such as babysitting, psychotherapy, or mas-
sage.

The range of service offerings make it difficult to generalize without a few further distinctions.

❖ Services are equipment-based or people-based.

❖ Services companies can choose among different processes to deliver their service.
❖ Some services need the client’s presence.
❖ Services may meet a personal need (personal services) or a business need ( business services)
❖ Service providers differ on their objectives (profit or non-profit) and ownership (private or
public)
Distinctive Characteristics of Services

Four distinctive service characteristics greatly affect the design of marketing programs: intangi-
bility, inseparability, variability, and perishability.

Intangibility Unlike physical products, services cannot be seen, tasted, felt, heard, or smelled
before they are bought. A person getting cosmetic surgery cannot see the results before the pur-
chase, and the patient in the psychiatrist’s office cannot know the exact outcome of treatment. To
reduce uncertainty, buyers will look for evidence of quality by drawing inferences from the
place, people, equipment, communication material, symbols, and price. Therefore, the service
provider’s task is to “manage the evidence,” to “tangibilize the intangible.”

Service companies can try to demonstrate their service quality through physical evidence and
presentation.11 Suppose a supermarket wants to position itself as the “fast” supermarket. It could
make this positioning strategy tangible through any number of marketing tools:
1. Place—The layout of the checkout area and the traffic flow should be planned carefully.
Waiting lines should not get overly long.
2. People—Checkout staff should be busy, but there should be a sufficient number to manage
the workload.
3. Equipment—UPC scanners, credit card readers, and electronic registers should all be state of
the art.
4. Communication material—signage and brochures—text and photos—should suggest effi-
ciency and speed.
5. Symbols—The supermarket’s name and symbol could suggest fast service, for instance,
“Speedy Shop.”
6. Price—The supermarket could advertise a $10 rebate if customers have to wait in line more
than five minutes.

Table 14.1 measures brand experiences along sensory, affective, behavioral, and intellectual di-
mensions. Applications to services are clear.
Because there is no physical product, the service provider’s facilities—its primary and secondary
signage, environmental design and reception area, employee apparel, collateral material, and so
on—are especially important. All aspects of the service delivery process can be branded, which
is why Allied Van Lines is concerned about the appearance of its drivers and laborers, why UPS
has developed such strong equity with its brown trucks, and why Doubletree by Hilton hotels
offers fresh-baked chocolate chip cookies to symbolize care and friendliness.

Service providers often choose brand elements—logos, symbols, characters, and slogans—to
make the service and its key benefits more tangible—for example, the “friendly skies” of United,
the “good hands” of Allstate, and the “bullish” nature of Merrill Lynch.

Inseparability Whereas physical goods are manufactured, then inventoried, then distributed, and
later consumed, services are typically produced and consumed simultaneously.A haircut can’t be
stored— or produced without the barber. The provider is part of the service. Because the client is
also often present, provider–client interaction is a special feature of services marketing. Buyers
of entertainment and professional services are very interested in the specific provider. It’s not the
same concert if Taylor Swift is indisposed and replaced by Beyoncé or if a corporate legal de-
fense is supplied by an intern because antitrust expert David Boies is unavailable. When clients
have strong provider preferences, the provider can raise its price to ration its limited time.

Several strategies exist for getting around the limitations of inseparability. The service provider
can work with larger groups. Some psychotherapists have moved from one-on-one therapy to
small-group therapy to groups of more than 300 people in a large hotel ballroom. The service
provider can work faster—the psychotherapist can spend 30 more efficient minutes with each
patient instead of 50 less-structured minutes and thus see more patients. The service organization
can train more service providers and build up client confidence, as H&R Block has done with its
national network of trained tax consultants.

Variability Because the quality of services depends on who provides them, when and where, and
to whom, services are highly variable. Some doctors have an excellent bedside manner; others
are less empathetic. Service firms know that variability in their performance puts them at risk.
Hilton initiated a major program to create more uniformity in guest experiences.

***HILTON HOTELS***
Between 1964 when Hilton Hotels sold its foreign licensee Hilton International Co. and 2006
when it bought it back, the two companies operated largely independently, and as a result, the
Hilton brand was no longer providing customers with a uniform highquality experience. Nomura
research analyst Harry Curtis said, “The brand standards in Europe were always very different
from those in the U.S. I think they were, quite frankly, a bit slacker in Europe.” Chris Nassetta,
appointed CEO in 2008, initiated H360, a project to review everything from breakfast fare to
bath amenities, the décor of lobbies, Wi-Fi service, hotel architecture, and handling of customer
complaints at all the company’s hotels. Nassetta said, “There was a huge amount of inconsisten-
cy in the granular standards that travelers care about.” As a result of H360, independent owners
of Hilton-branded hotels in the United States and abroad have been forced to upgrade to Hilton
standards where necessary or be dropped from the Hilton system. Protecting the brand seems to
have served the company well—by 2010, the company had the highest brand equity of nearly 40
hotel chains. ***

Service buyers are aware of potential variability and often talk to others or go online to collect
information before selecting a specific service provider. To reassure customers, some firms offer
service guarantees that may reduce consumer perceptions of risk.15 Here are three steps service
firms can take to increase quality control.

1. Invest in good hiring and training procedures. Recruiting the right employees and giving
them excellent training are crucial, whether they are highly skilled professionals or low-skilled
workers. Better-trained people exhibit six characteristics that improve service quality: compe-
tence, courtesy, credibility, reliability, responsiveness, and communication skill.

2. Standardize the service-performance process throughout the organization. A service blue-

print can map out the service process, the points of customer contact, and the evidence of service
from the customer’s point of view. Figure 14.2 shows a service blueprint for an overnight guest
at a hotel. Behind the scenes, the hotel must skillfully help the guest move from one step to the
next. Service blueprints can be helpful in identifying potential “pain points” for customers, de-
veloping new services, supporting a zero-defects culture, and devising service recovery strate-
gies.

3. Monitor customer satisfaction. Employ suggestion and complaint systems, customer surveys,
and third-party comparison shopping. Customer needs may vary in different areas, allowing
firms to develop region-specific customer satisfaction programs.18 Firms can also develop cus-
tomer information databases and systems for more personalized service, especially online.
Service firms can also design marketing communication and information programs so consumers
learn more about the brand than what their subjective experience alone tells them.

Perishability Services cannot be stored, so their perishability can be a problem when demand
fluctuates. To accommodate rush-hour demand, public transportation companies must own more
equipment than if demand was even throughout the day. Some doctors charge patients for missed
appointments because the service value (the doctor’s availability) exists only at the time of the
appointment. Demand or yield management is critical—the right services must be available to
the right customers at the right places at the right times and right prices to maximize profitability.
Several strategies can produce a better match between service demand and supply. On the de-
mand (customer) side:

• Differential pricing will shift some demand from peak to off-peak periods. Examples include
low matinee movie prices and weekend discounts for car rentals.
• Nonpeak demand can be cultivated. McDonald’s pushes breakfast service, and hotels promote
minivacation weekends.
• Complementary services can provide alternatives to waiting customers, such as cocktail
lounges in restaurants and automated teller machines in banks
• Reservation systems are a way to manage the demand level. Airlines, hotels, and physicians
employ them extensively.

On the supply side:

• Part-time employees can serve peak demand. Colleges add part-time teachers when enrollment
goes up; stores hire extra clerks during holiday periods.
• Peak-time efficiency routines can allow employees to perform only essential tasks during peak
periods. Paramedics assist physicians during busy periods.
• Increased consumer participation frees service providers’ time. Consumers fill out their own
medical records or bag their own groceries.
• Shared services can improve offerings. Several hospitals can share medical-equipment pur-
chases.
• Facilities for future expansion can be a good investment. An amusement park might buy sur-
rounding land for later development.