The services literature highlights differences in the nature of services versus products, which are believed to create special challenges for services marketers and for consumers buying services. To help understand these differences a number of characteristics that describe the unique nature of services have been proposed. These characteristics were first discussed in the early services marketing literature and are generally summarized as intangibility, inseparability, heterogeneity and perishability (Regan, 1963).
Inseparability is taken to reflect the simultaneous delivery and consumption of services (Donnelly, 1976) and it is believed to enable consumers to affect or shape the performance and quality of the service (Zeithaml, 1981). This principle means that the "production" and consumption of the service are simultaneous, although the consumer may indeed derive benefits from the service for a long time after the initial "production."
For example, the person getting the haircut is consuming it while it is being produced, but will also continue consuming it until the next haircut. A physical product, on the other hand, will probably not be consumed until some time has passed following its manufacture; in other words, there is a time gap between production and consumption for physical products, whereas with services, the consumption begins at the point of manufacture.
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Distribution (or inseparability) problems occur because the customer is required to travel to the seller for a service, in most cases i.e. to actually make the effort to travel - to Greece for the holiday, to the theatre to see the show. Here, extra time and money is being used up by the customer, which may influence the decision to buy. Services are inseparable from their production because they are typically produced and consumed simultaneously.
This is not true of physical products, which are often consumed long after the product has been manufactured, inventoried, distributed, and placed in a retail store. Inseparability is especially evident in entertainment services or professional services. In many cases, inseparability limits the production of services because they are so directly tied to the individuals who perform them.
This problem can be alleviated if a service provider learns to work faster or if the service expertise can be standardized and performed by a number of individuals (as H&R Block, Inc., has done with its network of trained tax consultants throughout the United States).
Let’s illustrate this characteristic on the following example: Private passenger automobile insurers provide their customers, called insureds, with insurance protection for potential monetary losses which can occur from the ownership or operation of an automobile. The basic coverages (categories of protection) are classified as bodily injury and property damage liability, medical payment, uninsured and underinsured motorist, collision, and damage other than collision (formerly called comprehensive physical damage).
Insurers also provide another coverage called personal injury protection in the most states, Puerto Rico, and the District of Columbia that have no-fault laws. All of these coverages are provided in a single private passenger automobile insurance policy called the Personal Automobile Policy (PAP). Private passenger automobile insurance was chosen for ease of understanding and since the PAP is the single largest form of property and liability insurance, generating $100 billion in premiums (gross sales) in the United States annually.
Inseparability of production and consumption suggests that services are typically produced and consumed at the same time (Berry, 1980). Zeithaml (1985, p. 33) notes that, "Whereas goods are first produced, then sold and then consumed, services are first sold, then produced and consumed simultaneously." Carmen and Langeard (1980, p. 8) add that inseparability "...forces the buyer into intimate contact with the production process."
Thus, marketing and production are highly interactive (Gronroos, 1978) since the seller and producer are the same entity (Upah, 1980). While the PAP object is first sold and then produced, its three major benefits (asset protection, piece of mind, and credit worthiness) are consumed over the policy period, not at the time of production. This characteristic is similar to a specially ordered automobile. The insured and the agent order a PAP object to be later delivered with the insured's chosen limits and types of coverages.
Upon delivery, the transaction for the policy period is usually complete (unless the insured has a covered loss) and consumption begins. This element definitely resembles a good. Also, the marketing and production functions associated with both PAP object and PAP service often are not provided by the same entities, much less at the same time. For example, the marketing agent may be an independent agent, an exclusive agent, or an employee of the insurer. Within the independent agency system, the independent agent sells the PAP and a separate entity, the insurer, often produces the PAP object.
In addition, regardless of the distribution channel employed, while most claims processing and settlements are conducted by the insurer, there are independent claims-handling services which may process some claims in some geographic areas. Even independent agents handle some small claims. Finally, independent attorneys are frequently used in claims settlement processes.
Thus, there may be as many as four separate entities involved in the total delivery of the PAP over the policy period. It can be concluded that the insured is not likely to be intimately involved with all phases of PAP marketing and production, which suggests that the PAP does not meet this distinguishing criterion of a typical service.
Second, in terms of Zeithaml's (1981) continuum of products, this description also places the PAP somewhere in the middle two-thirds of the continuum from easy-to-evaluate goods to difficult-to-evaluate services. Again, only the extremes of clothing, jewelry, and furniture, and medical diagnosis, auto repair, and a root canal are eliminated from comparison with the total PAP product.
That is, PAP object is easy to evaluate before purchase, but PAP contingent service is almost impossible to evaluate until later, if ever. Thus, the total PAP product cannot be classified as a pure service or as a pure product as are the products near the extremes on Zeithaml's continuum.
Third, since this description of the PAP with respect to the criterion of inseparability is not drastically different than it would be for life insurance, these contentions and analogies also are supported by Lovelock's classification (1981, 1983) of life insurance as a service directed at intangible assets.
That is, PAP contingent services, if rendered, are intangible actions directed at insureds' assets, where the insured is made whole in the event of a covered loss. As with similar services, such as securities, accounting, legal services, and banking, insurance service performances can be conducted at arms-length. Thus, the customer need not be present, physically nor mentally, at the service performance.
Lovelock's classification implies that the PAP (and other financial services) does not meet the traditional inseparability distinction between goods and services. First, the PAP is not produced and consumed at the same time; it is consumed over the policy period (Lovelock, 1983).
Second, the buyer of PAP object is not intimately involved with the production process; s/he is usually only involved with placing an order for the PAP object. Thus, the PAP exhibits additional tangible-like elements; further suggesting that the PAP is not a pure service with respect to the inseparability criterion.
As for examples from current operating practice in industry, note how sales can be encouraged by making the booking procedure as easy as possible – e.g. on the internet. Place or distribution is a major factor in developing a service marketing strategy because of the inseparability of services from the producer. As competition grows, the value of convenient location becomes more important. The availability of electronic distribution through the World Wide Web now provides global coverage for travel services, banking, entertainment, and many other information-based services.
With the awareness of location of customers, the location of business will shift to wherever the customer is located and remote service provision will further blur the line between production and consumption. Ubiquitous computing increases the chance of customers’ participation in service provision, although the interaction may primarily be with non-human agent. According to Weiser (1991) “Ubiquitous computers… reside in the human world and pose no barrier to personal interactions. If anything, the transparent connections that they offer between different locations and times may tend to bring communities [customer and provider] closer together”.
Ubiquitous computing provides customers with choice of medium of interaction, a customer could immediately locate the next available service provider and have array of means of contacting them: via phone, email, or face-to-face. The provider will also be able to instantly recognize the need of the customer and offer timely assistance. Building relationship with customer has been claimed to be difficult with IT since it is better done face-to-face.
Ubiquitous computing could, however, allow customers to interact with their service providers selectively in most easy and painless way. This could strengthen the providers’ ability to build strong relationships with customers. Ubiquitous computing could improve awareness, accessibility and responsiveness, all factors that are essential in establishing and maintaining a relationship.
Among the problems that are likely to arise for the operations manager because of this service characteristic, there is an important question of where the service shall be available. Will it be done strictly in an office or storefront environment, or will the service provider make house calls? For that matter, over what geographical territory will customers be solicited? With the advent of overnight deliveries, as well as the Internet, services can now be delivered over a large geographic area virtually seamlessly. T
here is more than sufficient evidence around to persuade one doubting the importance of service standards, that quality service should be the backbone of all activities and the number 1 priority starting with internal customer systems and continuing through to the interface with the paying customer. There are two elements that make up the provision of service: Services, i.e. the products; and Services, the manner in which the products are created and delivered. The process is as important as the outcome.
The manner in which service is delivered affects the perception of quality. The quality of a service is measured by the extent to which it meets the customer’s requirements. Customer satisfaction has to be the driving force and this requires awareness of customers and an understanding of their needs, requirements and expectations. This principle has to be applied to internal as well as external customers. When it becomes right inside, then it becomes right outside. When customers come into a business, the quality of the experience and their perceptions will be influenced by how much they know about the activity involved.
Providing service, as opposed to manufacturing products, has three unique characteristics. Among them there is inseparability - simultaneous production and consumption.
An operation manager should keep in mind that every part of an organization, every person, every task, affects and is affected by others. Therefore, the quality of service provided is the result of a total system of quality through every aspect of the organization. Achieving quality is dependant on sustained cooperation across all departments. Each individual must take responsibility for his/her own service quality but people can only produce quality if they experience it on a day-to-day basis in relation to their work, their colleagues and the organization.
Service excellence is dependent on controlling the processes, which consistently produce the desired quality. It is important to be able to measure all aspects of services offered and, equally importantly although more difficult, the delivery of service. The cost of poor quality service outweighs the cost of good quality service on every criterion you may care to identify.
Having completed your analysis you may then like to sit down with your management team and explore the opportunities which adopting new quality standards might offer your business. This can then be translated into clear objectives, an achievement strategy, and new operational principles to be introduced at the appropriate stage of your planning.
A key ingredient when placing emphasis on quality performance is that it must be constantly led from the top and reinforced by every manager; creating a climate of culture which focuses on zero tolerance of faults, thereby getting both services and service delivery right first time, all the time. Consistency of service driven by consumer needs.
Berry, L. L. (1980), "Service Marketing Is Different" Business, 30 (May-June), 24-29.
Donnelly J.H. Jr (1976). “Marketing Intermediaries in Channels of Distribution for Services”,Journal of Marketing, 40, 55 - 70
Carmen, J. M., and E. Langeard, (1980), "Growth Strategies of Service Firms," Strategic Management Journal, 1 (January-March), 7-22.
Gronroos, C. (1978), "A Service-Oriented Approach to Marketing of Services," European Journal of Marketing, 12 (8), 588-601.
Lovelock, C. H. (1981), "Why Marketing Management Needs To Be Different For Services," in J. H. Donnelly and W. R. George (Eds.), Marketing of Services, Chicago: American Marketing Association, 72-76.
Lovelock, C. H. (1983), "Classifying Services To Gain Strategic Insights," Journal of Marketing, 47, 9-20.
Regan W.J. (1963). “The Service Revolution”, Journal of Marketing, 47, 57 - 62
Upah, G. S. (1980), "Mass Marketing in Service Retailing: A Review and Synthesis of Major Methods, Journal of Retailing, 56 (Fall), 59-76.
Weiser, M., “The Computer for the 21Century”, Scientific American”, 1991, 265(3), 94-10
Zeithaml, V.A. (1981), "How Consumers Evaluation Processes Differ Between Goods and Services," in J. Donnelly and W. George (Eds.), Marketing of Services (pp.186-190), Chicago: American Marketing Association, 186-190.
Zeithaml, V.A., A. Parasuraman, and L.L. Berry (1985), "Problems and Strategies In Services Marketing," Journal of Marketing, 49, 33-46.
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