11.1 Classification of Services

People-Based Services

People-based services are when people primarily deliver the service, rather than equipment or machinery (see Figure 11.4 for examples). It’s the individuals delivering the service, and the knowledge and skills that they possess, that add value and allow the service to be performed. People-based services can be broken down further into these subcategories:

• services provided by unskilled labor: parking lot attendants, babysitters, and janitors
• services provided by skilled labor: plumbers, caterers, and hairstylists
• services provided by professionals: doctors, attorneys, college professors, and accountants

Figure 11.4 People-Based Services (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

Equipment-Based Services

Equipment-based service firms utilize equipment, machinery, and other forms of technology to perform service tasks (see Figure 11.5). Similar to people-based services, equipment-based services can be further broken down into subcategories:

• automated services: car washes and parking meters
• equipment-based services operated by relatively unskilled operators: dry-cleaning equipment
• equipment-based services operated by skilled operators: X-ray machines and ultrasound equipment

Figure 11.5 Equipment-Based Services (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

There is another way to categorize services, according to well-known author and professor Christopher Lovelock (1940–2008). He proposed four broad categories of services:

• people processing: services toward people’s bodies
• possession processing: services toward possessions
• mental stimulus processing: services toward people’s mind
• information processing: services toward intangible assets⁴

In Figure 11.6, the categories are defined on a two-dimensional matrix, wherein one of the dimensions is the direct recipient of the service and the other is the nature of the service act.⁵

Figure 11.6 Lovelock’s Categories of Service (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

Let’s look at each of these categories in more depth. The first two categories (people processing and possession processing) involve tangible actions directed toward a person’s physical body or property, whereas mental stimulus processing and information processing involve intangible actions directed toward a person’s mind or information. We’ll expand on this in the following sections.

People Processing

In people processing services, the customer is a direct recipient of the service, and the production and consumption of the service are simultaneous. Consider examples of services where you must be present in the service facility in order to interact with the service provider and receive the service, such as barbershops or hair salons, physical therapists’ offices, or restaurants.

Possession Processing

The difference between people processing and possession processing is that the service is directed toward the customer’s physical possessions. In other words, production and consumption are separate. Your only involvement is dropping off the item that requires service or repair and explaining the problem. For example, once you have taken your car in for an oil change, you do not need to be physically at the location for the oil change to occur. Similarly, once you’ve dropped your clothes off at the dry cleaner’s, you don’t need to be physically present when the cleaning process is performed. These services are tangible because the direct recipient is one of your possessions rather than you as a person.

Mental Stimulus Processing

In its simplest explanation, mental stimulus processing is when the services interact with your mind rather than your body. Time and mental effort are required from the customer to receive this type of service. What you’re doing right now—reading this textbook—is a prime example of mental stimulus processing. Other examples include psychotherapy or counseling services. The key here is that services rendered in this category are intangible.

Information Processing

Information processing is the most intangible form of service, although it can be transformed into a tangible service output like reports, books, letters, DVDs, etc. Some examples of information processing services are things like meeting with your financial advisor regarding investment advice, legal services, and banking.⁶

Service Intangibility

By their very nature, services are intangible. This means they can’t be seen, tasted, felt, smelled, or heard before they are purchased. Consider the last time you purchased automobile insurance for your car. Other than the physical policy the company sends you (the only tangible asset), what you’ve paid for is completely intangible—it’s the company’s promise to pay claims against the policy.

Intangible services have a number of implications in marketing. The very fact that there’s nothing to touch, hear, smell, and so on typically increases the level of uncertainty that a consumer faces when choosing between services offered by your organization or those of competitors. Intangible services can seldom be tried out, inspected, or even given a “test drive” by a customer. Customers have to rely on the word of the marketers in order to assess what they’re actually going to get in return for what they’ve paid. In effect, they are buying a promise.

Savvy marketers reduce this uncertainty by creating physical “evidence” that allows the consumer to picture the service before it is purchased. For example, a hair salon may have imaging software that predicts how you would look with different hairstyles or colors. Companies like Zenni and Eyebuydirect have a virtual mirror that allows you to “try on eyeglasses” and see how the selected frames look on your face before you purchase.⁷

Service Inseparability

The order of production and consumption between a physical product and a service differs. Think about a box of Girl Scout cookies, a physical good or product. The cookies were produced, stored, sold, and finally consumed. That’s not the way it works with services. Like goods, services are sold, but they are produced and consumed simultaneously. They can’t be separated from the service providers, whether they are people or equipment.⁸ For example, try to get money out of your bank on a weekend or evening without an ATM, or try to get a haircut without the physical presence of your stylist. That’s the concept of service inseparability—you can’t separate the delivery of the service from the presence of the customer. In other words, the service provider is physically connected to the service and is evaluated on the basis of their communication skills, language, demeanor, personal hygiene, and clothing.

The impact to the marketer in these services—in which the service provider and customer must both be present—is how service providers (sometimes called frontline employees) conduct themselves in the presence of the customer because it may determine the likelihood of repeat business.⁹ There are also other marketing implications with this concept, such as customer cooperation and participation, not to mention the influence from other customers who may be present.

Service Variability

Have you ever gone to a restaurant and had stellar customer service? You were seated promptly by a cheerful hostess; the busser filled up your water glass and refilled it several times during the evening; the waitstaff was attentive but not to the point of being annoying; and your dirty dishes were cleared promptly. But perhaps the next time you visit the same restaurant, your experience isn’t quite as amazing. The hostess isn’t as cheerful, and it takes her several minutes to seat you. It takes a while for someone to refill your water glass. The waitstaff isn’t nearly as attentive as they were during your first visit. What went wrong?

Perhaps what you’ve experienced is what’s known as service variability—the quality of the service depends on who provides it, when it is provided, and how it is provided. For example, Delta Air Lines prides itself on improving peoples’ lives and exceeding customer expectations.¹⁰ However, because services are provided by humans who have human experiences where they may not be feeling well or they are having a bad day, the service may be variable between employees. One Delta employee may be cheerful and efficient, while another lags due to their energy and state of mind.

This is a challenge to marketers because products generally have little variability: each unit is built to certain specifications. For example, if you buy an Apple iPad Pro and your classmate purchases the same model, it’s likely that the two iPads will be virtually identical. The case color may be different, but otherwise they are the same. That’s not the case with a service, where there will undoubtedly be variations in the quality of the service depending on who offers the service, when it is offered, and at which location. Service-based companies need to rely on standardizing processes to the extent possible, frequent audits, customer surveys, and most importantly, customer feedback.

Service Perishability

Unlike most goods, services can’t be produced and stored for later use or sale. Services are, in effect, performances by the service provider. That’s the concept of service perishability. Did you miss tonight’s concert because of traffic? Too bad, because a ticket for tonight’s concert can’t be used for tomorrow night’s performance. Hotel rooms that are not occupied, airline seats that are not purchased, and unused gym memberships cannot be reclaimed.¹¹ Because these items can’t be stored for later use, they are considered a perishable service. This is particularly important for marketers because the perishability factor and the fluctuating demand poses special problems in capacity planning, scheduling, product planning, and pricing.¹²

One way that marketers deal with this problem is by manipulating demand. Consider how many restaurants offer “happy hours” with discounted food and drinks during the late afternoon or early evening. Restaurants do this because this time is typically the period where there is a lull before the start of the dinner rush.