chapter 5: Services and Relationship Marketing
5.1 The Unique Characteristics of Services
What is a service?
- A service is any act or performance offered by one party to another that is essentially
intangible
- Consumption of the service does not result in any transfer of ownership even though
the service process may be attached to a physical product
Why are services important?
- Services are a large part (46%) of the U.S. Gross Domestic Product than goods
- Increase of 200% since 2000
- More demand for services and more interest in new ones
Distinguishing (unique) characteristics of services:
1. Intangibility: (untouchable) Services cannot be seen, tasted,
felt, heard, or smelt before they are bought
- A performance rather than an object
- Difficult to evaluate before consumption
- Increased uncertainty
- Use substitute cues
Quality-related cues:
→ Intrinsic cues: features that come from the product
itself things: you can directly see, touch, smell, taste;
or feel.
→ Extrinsic cues are said to surround the ‘service
product’ and can be changed relatively easily
Evidence management = The use of tangible elements to reinforce the quality of a service
eg. Michelin star, tripadvisor,...
2. Perishability (mortal/ physical): Services are manufactured and consumed
simultaneously: no storage possible (eg. empty seats in a theatre → these
places are lost and can never be sold)
Particularly a problem with demand fluctuations (demand doesn’t stay constant)
- Charging for missed appointments
- Differential pricing
- Reservation system
- Shared services
Increase off-peak demand: finding ways to get more customers during slow or less busy
times
eg. Winter Efteling
Differential pricing = Dynamic pricing:
Charge different prices for the same service depending on
- Time of purchase
- Customer segments
, - Demand levels
Offer additional services: giving customers extra benefits or options beyond the main product
or service
eg. offering a biking tour to your hotel stay
3. Variability
- Services vary greatly depending on who provides them and when, where, and
how
- Quality = difficult to control
eg. in theatre: better main character yesterday → disappointing
→ Increase consistency: People
- Invest in recruiting the right employees
- Provide excellent training
- Motivate staff by providing employee incentives (motivation)
→ Employee empowerment and accountability (responsibility)
- Empower employees to take action
- Increase visibility of service employees and accountability to customers
→ Standardize the service performance (=how well a service does its job)
process
→ With a little help from technology
4. Service inseparability
Services are consumed at the point at which they are produced
→ service delivery cannot be separated or split out of service provision or
service consumption
- Customers participate actively
- Value is created in the provider-customer interaction (co-creation)
- Often in the presence of other customers
→ Particularly difficult when demand rises
5. Lack of ownership
- Services cannot be owned, nothing is transferred
- Loyal schemes (e.g., frequent flyer programmes) are used to create some
sense of ownership
→ psychological ownership: you can manipulate this loyalty
programmes
eg. “I’ve earned Gold status with this airline,” → creates a feeling of pride and
belonging → This emotional attachment makes them more likely to choose the
same airline again, even if a competitor offers a cheaper ticket.
Some remarks on services
- Difficult to protect (E.g., yoga everywhere)
5.1 The Unique Characteristics of Services
What is a service?
- A service is any act or performance offered by one party to another that is essentially
intangible
- Consumption of the service does not result in any transfer of ownership even though
the service process may be attached to a physical product
Why are services important?
- Services are a large part (46%) of the U.S. Gross Domestic Product than goods
- Increase of 200% since 2000
- More demand for services and more interest in new ones
Distinguishing (unique) characteristics of services:
1. Intangibility: (untouchable) Services cannot be seen, tasted,
felt, heard, or smelt before they are bought
- A performance rather than an object
- Difficult to evaluate before consumption
- Increased uncertainty
- Use substitute cues
Quality-related cues:
→ Intrinsic cues: features that come from the product
itself things: you can directly see, touch, smell, taste;
or feel.
→ Extrinsic cues are said to surround the ‘service
product’ and can be changed relatively easily
Evidence management = The use of tangible elements to reinforce the quality of a service
eg. Michelin star, tripadvisor,...
2. Perishability (mortal/ physical): Services are manufactured and consumed
simultaneously: no storage possible (eg. empty seats in a theatre → these
places are lost and can never be sold)
Particularly a problem with demand fluctuations (demand doesn’t stay constant)
- Charging for missed appointments
- Differential pricing
- Reservation system
- Shared services
Increase off-peak demand: finding ways to get more customers during slow or less busy
times
eg. Winter Efteling
Differential pricing = Dynamic pricing:
Charge different prices for the same service depending on
- Time of purchase
- Customer segments
, - Demand levels
Offer additional services: giving customers extra benefits or options beyond the main product
or service
eg. offering a biking tour to your hotel stay
3. Variability
- Services vary greatly depending on who provides them and when, where, and
how
- Quality = difficult to control
eg. in theatre: better main character yesterday → disappointing
→ Increase consistency: People
- Invest in recruiting the right employees
- Provide excellent training
- Motivate staff by providing employee incentives (motivation)
→ Employee empowerment and accountability (responsibility)
- Empower employees to take action
- Increase visibility of service employees and accountability to customers
→ Standardize the service performance (=how well a service does its job)
process
→ With a little help from technology
4. Service inseparability
Services are consumed at the point at which they are produced
→ service delivery cannot be separated or split out of service provision or
service consumption
- Customers participate actively
- Value is created in the provider-customer interaction (co-creation)
- Often in the presence of other customers
→ Particularly difficult when demand rises
5. Lack of ownership
- Services cannot be owned, nothing is transferred
- Loyal schemes (e.g., frequent flyer programmes) are used to create some
sense of ownership
→ psychological ownership: you can manipulate this loyalty
programmes
eg. “I’ve earned Gold status with this airline,” → creates a feeling of pride and
belonging → This emotional attachment makes them more likely to choose the
same airline again, even if a competitor offers a cheaper ticket.
Some remarks on services
- Difficult to protect (E.g., yoga everywhere)
