chapter 4

Service Classification Scheme

This slide has been modified from its original version

Why classify services?• Classification schemes are used to organize items into different classes or

groups for systematic investigation and theory development.• managers from various fields perceive their service as unique (when it is

not)

• Better understanding of needs and behavior of customers by classifying goods in relevant categories.

• Some service industries have similar challenges Most of the services share relevant marketing characteristics eg :

• Relationship between customers and service provider • Patterns of demand • Supply constraints

Examples: Similar behavior of different service industries

Telecom industry and call center • Similar demand patterns

Doctors, consultants and lawyers • Frequent meetings with more personalization

Airlines and Hotels • High infrastructure costs

Haircutting, boutique and spa • More personalized services

Classification of service• • degree of tangibility or intangibility of service

processes• • direct recipient of the service process• • place and time of service delivery• • customisation versus standardization• • nature of the relationship with customers• • extent to which demand and supply are in

balance• • extent to which facilities, equipment, and

people are part of the service experience

Classification of service (cont)

Dimension / Strategy to Classify Service

(Nature of Service Act and Recipient of Service)

Classification in these slide series

• Dimension / Strategy to Classify Service(Nature of Service Act and Recipient of Service)

• Dimension / Strategy to Classify Service (Relationship with customers)

• Dimension / Strategy to Classify Service(Customization and Judgment)

• Dimension / Strategy to Classify Service(Method of Service Delivery)

• Dimension / Strategy to Classify Service(Nature of Demand & Supply)

• Service as process

UNDERSTANDING THE NATURE OF SERVICE:

Two parameters are used in this classification :

(a) Who or what is the direct recipient of the services?• Directly on people bodies or mind ?• directed at goods and other physical possessions or intangible

assets ?

(b) What is the nature service act?• Service performance may result in tangible action • Service performance may result in intangible action

Dimension / Strategy to Classify Service(Nature of Service Act and Recipient of Service)

Dimension / Strategy to Classify Service(Nature of Service Act & Recipient of service)

9

Direct Recipient of the Service Nature of the Service Act

People

Things

People’s bodies:

Health care Passenger transportation Beauty salons Exercise clinics Restaurants

Physical possessions:

Freight transportation Repair and maintenance Veterinary care Janitorial services Laundry and dry cleaning

Tangible actions People’s minds:

Education Broadcasting Information services Theaters Museums

Intangible assets:

Banking Legal services Accounting Securities Insurance

Intangible actions

Dimension / Strategy to Classify Service(Nature of Service Act & Recipient of service)

People processing involves tangible actions to people's bodies. Example : passenger transportation, haircutting, etc. Customers need to be physically

present throughout service delivery to receive its desired benefits.

Possession processing includes tangible actions to goods and other physicalpossessions belonging to the customer. Examples of possession processing include car repair,cleaning services. The object

requiring processing must be present, but the customer need not be.

Mental stimulus processing refers to intangible actions directed at people's minds. Examples : entertainment, theatre performances. customers must be present

mentally but can be located elsewhere but connected by telecommunication linkages.

Information processing describes intangible actions directed at customers assets. Examples insurance, banking,and consulting .Only little direct involvement with the customer maybe needed once the request for service has been initiated.

Implication of classification based on nature of service act (Nature of Service Act and Recipient of Service)

Physical presence of customers involves: Interaction with service personnelAttention given to nature of service facilities ( a.k.a

service “factory” i.e Facility location and facility design

Characteristics of other customers using the same service

No physical presence of customer Customer does not meet service provider face-to-face Focus on facilities may not be that important but

effectiveness of service needs great attention

Dimension / Strategy to Classify Service (Relationship with

customers)

Dimension / Strategy to Classify Service (Relationship with customers)

Membership Relationship• Some services involve a formal relationship, where customer are known

to the organization and all transactions are individually (like a visit to the doctor).

• Some services lend themselves naturally to a membership relationship, in which customers must apply to join the club and their subsequent performance is monitored over time (as in insurance or college enrolment)

• Sometimes companies create special club memberships or frequent user programs to reward loyal customers. For instance, a carwash offers a fidelity card allowing a free wash after ten visits.


Non Formal Relationship• But in other services, unidentified customers can

come and consume and then disappear from the organization's sight (for instance, the meal in a McDonalds).

• Other services, like buses, hair salons, dry cleaners, and airlines, need to undertake proactive efforts to create an ongoing relationship with their customers.


• Continuous delivery is typical only for “public goods”.

• Discrete transactions make customers “anonymous” what makes marketing harder, since suppliers are less informed about who their customers are and how they use the service.


16

Type of Relationship between Service Organization and Its Customers

Nature of Service Delivery

“Membership” relationship

No formal relationship

Insurance Telephone subscription Electric Utility Banking

Radio station Police protection Lighthouse Public Highway

Continuous delivery of service

Long-distance phone calls Theater series tickets Transit pass Sam’s Wholesale Club Airline frequent flyer

Restaurant Pay phone Toll highway Movie theater Public transportation

Discrete transactions

• Dimension / Strategy to Classify Service

(Customization and Judgment)

Dimension / Strategy to Classify Service(Customization and Judgment)

Customization is thus another method of classifying services based on two dimensions:

• Extent of customization• Extent of judgment/discretion used during service

delivery

• Low customization is when the service remains unchanged whoever the customer may be TV, Radios, movies, car servicing etc.

• Very high customization is when the service is practically tailored to the requirements of the customer, as in the case of legal advice or hospital treatment


19

Extent to Which Service Characteristics Are Customized

Extent to Which Personnel Exercise Judgment in Meeting Customer Needs

High

Low Surgery

Taxi services Gourmet restaurant

Preventive health programs Education (large classes) Family restaurant

High

Telephone service Hotel services Retail banking Cafeteria

Public transportation Spectator sports Movie theater Institutional food service

Low


• Where discretion is high, training of staff and control of process are important.

• Where both customization and discretion are low, standardized procedures and systems may be appropriate.

• Consistency of delivery, standardization and use of equipment can be attempted if the service moves to the bottom right quadrant

• If a service can be moved to the left top quadrant, here is enhancement in value a “WOW” experience is possible


• With high levels of computerization, high levels of customization has become a norm.

• Examples : Students are offered a “cafeteria” of subjects from which they may choose specified number to complete a course

• Electronic kiosks enable customers to design labels and greeting cards on the spot, composing their own messages


(Method of Service Delivery)

Dimension / Strategy to Classify Service(Method of Service Delivery)

• Key questions: does the firm currently require customers to be in direct physical contact with personnel, equipment, and facilities?

• if yes, do customers have to visit the facilities of the service organization or the service provider go to customer’s own sites?

• Alternatively, can transactions between provider and customer be completed at arm’s length? E.g through mail or electronic channels?

• Another issue: distribution – does the company require one or multiple distribution sites?

Dimension / Strategy to Classify Service(Method of Service Delivery)

24

Availability of Service Outlets

Nature of Interaction between Customer and Service Organization Single site Multiple site

Customer travels to service organization

Theater Barbershop

Bus service Fast-food chain

Service provider travels to customer

Taxi Pest control service Taxi

Mail delivery AAA emergency repairs

Transaction is at arm’s length

Credit card company Local TV station

Broadcast network Telephone company


(Nature of Demand & Supply)

Dimension / Strategy to Classify Service(Nature of Demand & Supply)

• Demand and supply factors are important in service business because of the characteristic of perishability.

• Some services have steady demand like a popular restaurant.

• Some others have highly fluctuating demand based on the time of the day or season (for example the demand for electricity increases or decreases according to weather)


27

Extent of Demand Fluctuation over Time

Extent to which Supply Is Constrained

Wide

Narrow

Electricity Telephone Police emergency Hospital maternity unit

Insurance Legal services Banking Laundry and dry cleaning

Peak demand can usually be met without a major delay

Tax preparation Passenger transportation Hotels and motels

Fast food restaurant Movie theater Gas station

Peak demand regularly exceeds capacity


When the demand for service fluctuates widely over time, capacity must be adjusted to accommodate the level of demand e.g

hiring part time employees or renting extra facilities to manage excess demand.

Marketing strategies must be implemented to predict, manage, and smooth demand levels

to bring them into balance with capacity.

Service as Process

Service as Process• Marketers need to understand the nature of the

processes through which services are created and delivered because their customers are often involved in service production and have preferences for certain methods of service delivery

• A process is a particular method of operation or a series of actions, typically involving sequential steps. (range from simple procedures involving only a few steps e.g filling a car's tank with fuel- to complex activities like transporting passengers on an international flight.

Service as Process (cont)

• Marketers need to understand: • (1) whether the service is directed at

customers themselves or at their possessions• (2) whether service entails delivery of

tangible or intangible actions,• (3) the sequence in which different elements

of servicedelivery need to be organized• (4) the role played by information.

Service as Process (cont)

Pls refer to the Dimension / Strategy to Classify Service (Nature of Service Act & Recipient of Service) for the explanation of “SERVICE AS A PROCESS”

THANK YOU

• References :• Fundamentals in “Service Marketing” (n.d.).• Prabhakar, K. (n.d.). Classification of Services.

chapter 4

Documents

service nature of service

service relationship

service customization

nature service act

service process place

judgmentdimension strategy

customersdimension strategy

slide seriesdimension