Services are offerings by a firm that is in the form of deeds, processes, and performance. A service is an activity or benefit that is extended by one party to another.
It is intrinsically intangible in nature, and it does not result in any transfer of ownership. In the U.S., the service sector contributes to more than 65% of the total GDP.
Services – Characteristics
Intangibility- Service is not a Physical Object
Heterogeneity- Challenging to establish a standard for service due to its inconsistency, variability and non-standardization
Inseparability – Signifies that services are produced and consumed simultaneously because customers are a vital part of the service production process
Perishability – Services are perishable and cannot be stored for later use unlike goods
Service is not a physical object. Hence, it cannot be seen, tasted, smelt, or felt, like physical products. Since service is an experience, the customer does not know about the service until he/she uses it once. To know how a stay at the Ritz Carlton hotel feels – the customer has to pay and experience the stay.
Challenging to establish a standard for service due to its inconsistency, variability and non-standardization. The service is often delivered by different people with different delivery times and customer involvement levels.
The quality of service experienced by a traveller while flying an airline will differ each time depending on the cabin crew, co-passengers, and travel time.
This signifies that services are produced and consumed simultaneously because customers are a vital part of the service production process. This concept can be better grasped through a comparison of services and goods.
Apple devices are assembled in China or India, stored at multiple distribution units worldwide, and then sold by local retailers both online and offline to customers in their country.
A health check-up at a Hospital is a service. First, one needs to pay a consultation fee, followed by a real-time doctor-patient session in which both the parties need to be physically present for service delivery.
It is a fact that services are perishable and cannot be stored for later use unlike goods, A hotel room’s rate is INR. 5,000 per night, so the maximum monthly revenue (assuming 30 days) from this room is INR. 1,50,000.
If the room is unoccupied for 10 days, the hotelier loses INR. 50,000 (INR 5,000 * 10 Days) which cannot be recovered as the service is perishable.
Physical Goods vs. Services
|A thing.||An activity or process.
|Production and distribution are separate from consumption.||Production, distribution and consumption occur simultaneously.
|Core value produced in the factory.||Core value produced when service providers and customers interact.
|Can be stored.||Cannot be stored.
|Transfer of ownership possible.||No transfer of ownership.
|No participation of customer is required in the production process.||Involves the participation of customers in the production process.
The Goods-service continuum refers to a representation of the correlation between goods and services. What a customer gets delivered today is a combination of goods and services
1. Companies offering only Tangible Goods
Companies provide only tangible goods and do not offer any services, related or otherwise, with the products.
2. Services offered along with Tangible Goods.
In the case of technology-related goods, customers need to be familiarized with the installation and usage of the product. In such instances, delivery installation, operational training and after-sales workshop services are provided by the firm itself.
Example: Tesla, Apple iPhone, Hitachi Air Conditioners
3. Goods and Services in Nearly Equal Measure
Some goods and services are offered in nearly equal proportions to make it a pleasant experience for the customer.
For example, Ritz Carlton, Starbucks
4. Services accompanied by Minor Goods
In such a case, the service is accompanied by small tangible products, either independently, or as part of the marketer’s offer.
For example, Etihad Airways, JP Morgan Chase Bank
5. Pure Service which is not accompanied by Goods
Companies may provide services that may not be accompanied by any goods.