services marketing 03 19 2013 the uniqueness of services services o intangible activities or benefits that an organization provides to satisfy consumers needs in exchange for money or something else of value services have become a significant component of the global economy and one of the most important components of the U S economy from services o in the united states more than 47 of the GDP now comes services also represent a large export business o the 560 billion of service exports in 2010 is one of the few areas in which the united states has a trade surplus the growth of this sector is the result of increased demand for services that have been available in the past and the increasing interest in new services the 4 I s of service the four I s of service o intangibility o inconsistency o inseparability o inventory intangibility services are intangible o they cant be touched held or seen before the purchase decision because services tend to be a performance rather than an object they are more difficult for consumers to evaluate o to help consumers assess and compare services marketers try to make them tangible or show the benefits of using the service inconsistency developing pricing promoting and delivering services is challenging because the quality of a service is often inconsistent o because services depend on the people who provide them their quality varies with each persons capabilities and day to day job performance inconsistency is much more of a problem in services than it is with tangible goods consistent o tangible products can be good or bad it terms of quality but with modern production lines the quality will at least be organizations attempt to reduce inconsistency through standardization and training inseparability a third difference between services and goods and related to problems of consistency is inseparability o in most cases the consumer cannot separate the deliverer of the service from the service itself the amount of interaction between the consumer and the service provider depends on the extent to which the consumer must be physically present to receive the service finally services such as banking consulting and insurance can now be delivered electronically while this approach can create value for consumer a disadvantage of some self service technologies is that they are perceived as being less personal inventory inventory inventory problems exist with goods because many items are perishable and because there are costs associated with handling with services inventory carrying costs are more subjective and are related to idle production capacity o when the service provider is available but there is no demand for the service the inventory cost of a service is the cost of paying the person used to provide the service along with any needed equipment inventory carrying costs can be significantly lower or nonexistent because the idle production capacity can be cut back by reducing hours or having no salary to pay because of the commission compensation system one reason service providers must maintain production capacity is because of the importance of time to todays customers the service continuum the four I s differentiate services from goods in most cases but many companies are not clearly service based or good based what companies bring to the market ranges from the tangible to the o this range of product dominant to service dominant offerings is referred to as the service continuum for many businesses today it is useful to distinguish between their o either a product or a service and supplementary services supplementary services often allow service providers today differentiate their offering from competitors and they may add value organizations intangible core offering for consumers o while there are many potential supplementary services key categories of supplementary services include consultation finance shipping installation maintenance and upgrades classifying services services can also be classified in several ways according to whether o they are delivered by people or equipment o they are for profit or nonprofit o they are government sponsored delivery by people or equipment equipment based services do not have the marketing concerns of inconsistency o because people are removed from the provision of the service electric utilities from example can provide a service without frequent person contact with customers profit or nonprofit organizations many organizations involved in services also distinguish themselves by their tax status as profit or nonprofit organizations o in contrast to profit organizations nonprofit organizations excesses in revenue over expenses are not taxed or distributed to shareholders when excess revenue exists the money goes back into the organizations treasury to allow continuation of the service o based on the corporate structure of the nonprofit organization it may pay tax on revenue generating holdings not directly related to its core mission government sponsored a third way to classify services is based on whether or not they are government sponsored o although there is no direct ownership and they are nonprofit organizations governments at the federal state and local levels provide a broad range of services how consumers purchase services successful service organizations like successful product oriented firms must understand how the consumer makes a service purchase decision and quality evaluation and in what ways a company can present a differential advantage relative to competing offerings the purchase process purchase many aspects of services affect the consumers evaluation of the o because services cannot be displayed demonstrated or illustrated consumers cannot make a pre purchase evaluation of all the characteristics of services similarly because service providers may vary in their delivery of a service an evaluation of a service may change with each purchase o such as color size and style which can be determined before search properties purchase experience properties consumption o which can be discerned only after purchases or during credence properties o or characteristics that the consumer may find impossible to evaluate even after purchase and consumption to reduce the uncertainty created by these properties service consumers turn to personal sources of information such as early adopters opinion leaders and reference group members during the purchase decision process assessing service quality once a consumer