What is a service? While this is a simple question, it is more complex than you might think. Is it the coffee you get served in your favorite coffee bar? Is it the repair service for your smartphone? Or the fact that you have mobile data nearly everywhere? A service can be much more than that. Services comprise a very broad range of activities in a growing service-based economy. Let’s have a look at the definition of services and the various qualities and characteristics of services. We will explain what distinguishes a service from a product or good and how to recognize a service. Read on to learn more about the definition of services as well as the unique characteristics of services.
Definition of Service
Let’s start at the beginning. What is the definition of a service? Simply put, services are a special form of product which consists of activities, benefits or satisfactions offered for sale. These are intangible and do not result in the ownership of anything.
Services are often contrasted to products. In the most common understanding, a product is tangible, meaning it can be touched or felt. A service on the other side would be intangible. However, this distinction is not fully correct. What we should actually compare a service to is labelled a good. While a good is something that is tangible, a service is not. At the same time, a service is actually a special form of a product – while a good is another form.
Importance of Services for the World Economy
Without doubt, services have grown dramatically in recent years. As the share of services is growing rapidly in the world economy, one thing is clear: Services are becoming more and more important. Today, they make up already more than 65% of the gross world product. In developed countries, the service sector contributes more to economic growth than any other sector.
However, services can mean so many things, that the range of service industries is huge. Also, you can imagine that not only companies offer services, but also governments and non-profit organizations. However, all services have certain characteristics in common. Therefore, let’s now have a look at the unique qualities and characteristics of services.
Characteristics of Services
In the following, we will go into the most relevant qualities of services. These characteristics apply universally to any service. They make services unique and different from goods.
The key characteristics of services are:
- Lack of ownership
- User participation
When thinking about the characteristics of services, intangibility may come to your mind first. Service intangibility means that services cannot be seen, tasted, felt, heard or smelled before they are bought. You cannot try them, like you would maybe take a car on a test drive first. For instance, airline passengers have nothing but a ticket and a promise that they will arrive at a certain time at a certain destination. But there is nothing that can be touched.
However, intangibility does not mean that there is nothing tangible surrounding the actual service delivery. In many cases, you will see tangible elements that go with the service itself. Tangible dimensions may include for instance the place (e.g., a barber shop), equipment (e.g., the scissors), and communication material (e.g., flyers promoting the barbershop). These tangible dimensions are part of the experience the customer buys. Also, they help to prove the service quality.
Let’s stick with the barbershop example for a second. While you primarily go there to buy a haircut, you get much more than that. The whole customer experience includes a physical barbershop, which must look professional and stylish to attract you and convince you of the service quality. The physical setting will also determine whether you go there in the first place, based on its location, cleanliness and look. Once the physical setting has convinced you of the service quality and great experience you will likely get, you might have a look at all the professional equipment. There will be lots of it – scissors, trimmer machines, hair dryers, and of course comfy chairs, basins and so on. This equipment ideally convinces you of a professional and efficient haircut. Finally, let’s consider the communication materials that might have brought you here. A professional-looking flyer, or a billboard ad – without it, you might not have gone there for the haircut.
As you can see, intangibility is a tricky concept. While intangibility is one of the key characteristics of services, they are seldom completely intangible. For most services, you will recognize that tangible elements are part of the experience. The core service, however, is in all cases intangible.
Inseparability may not come to mind first when thinking about the characteristics of services, but it is an important part of every service. Inseparability means that services are produced and consumed at the same time. This also entails that services cannot be separated from their providers. Contrary to services, physical goods are produced, then stored, later sold, and even later consumed. Services are first sold, then produced and consumed at exactly the same time.
A product can, after production, be taken away from the producer. However, a service is produced at or near the point of purchase. For instance, when visiting a restaurant, you order your meal. But you also order the waiting and delivery of the meal, the service provided by the waiter, etc. All these elements, including the providers, are part of the service and therefore inseparable. In services marketing, a service provider is the product.
Variability is another key characteristic of services. It refers to the fact that the quality of services can vary greatly, depending on who provides them and when, where and how. Because of the labor-intensive nature of services, there is a great deal of difference in the quality of service provided by various providers, or even by the same providers at different times.
Let’s consider an example, a big hotel chain. As a renowned hotel chain, it may have a reputation for providing better service than others. However, the service quality will never be the same. One employee may be very cheerful and provide front desk services particularly efficient. Another employee might just have a bad day and be a bit slower and maybe even unpleasant. But even the quality of services provided by a single hotel employee is not always the same. For instance, energy levels differ depending on the time of day.
As a service company’s goal is to provide consistent high quality services at all time, service variability is a challenge. Luckily, it can be managed in several ways. Firstly, employees should be selected by their ability to provide consistent service quality. Next, they should be trained carefully and regularly to avoid drops in service quality. In addition, you may consider to introduce incentives to reward employees for delivering consistent service quality. For instance, you could ask customers to rate their satisfaction with the service, or implement complaint systems.
Perishability means that services cannot be stored for later sale or use. In other words, services cannot be inventoried. This is one of the most significant characteristics of services, since it may have a major impact on financial results.
Doctors or dentists often charge patients for missed appointments because the service value has foregone. The value existed only at that particular point and disappeared when the patient did not come.
When demand is steady, the perishability of services is not a major problem. However, in case of fluctuating demand, service firms can have difficult times. For this reason, transport companies own much more equipment than they would if demand were even throughout the day: the demand during rush-hours needs to be served at that specific time, it cannot be served later or earlier.
Consequently, service companies use various techniques for creating a better match between demand and supply. For instance, a key technique is called Demand Shifting. By charging different prices at different times, demand may be shifted from peak periods to off-peak periods. Next to off-peak pricing strategies, firms might consider non-peak promotions, complementary services, and reservation systems to shift demand to non-peak periods. On the supply side, companies can for instance hire part-time employees to serve peak demand. Of course, you could also simply expand capacity to serve demand during peak periods, although there is a limit to that.
Consider the last service you used. Maybe it was a restaurant visit where you got great service. Or you have been watching your favorite TV show on a streaming platform. Whatever it was, you participated in the service.
User participation is one of the most important characteristics of services, even if it is often forgotten. Indeed, users participate in every service production. Even when the user is not required to be at a location where the service is performed, users participate in every service production. A service cannot be separated from its provider, but neither can it be separated from its user. This concept is closely related to the other characteristics of services we have discussed so far.
Lack of Ownership
Lack of ownership is another key service characteristic. It refers to the fact that you cannot own and store a service like you can a product. This characteristic is strongly linked to several other characteristics of services, such as intangibility, perishability, and inseparability. The lack of ownership is actually so crucial to understand services that we have mentioned it already. Remember the definition of services: Services are a special form of product which consists of activities, benefits or satisfactions offered for sale, which is intangible and does not result in the ownership of anything.
Due to the lack of ownership, it is required to market services in a different way than goods. The ownership of goods transfers with the sale, which also provides an opportunity to the buyer to resell the good. This does not work for services. As a user, you just have access to the service. And, since, the service is perishable, once used by you, you cannot hand on the ownership of the service – there is no ownership. For example, you might book a hotel room or pay for using a swimming pool. However, after you have spend a night in the hotel or swum a few lanes in the pool, you don’t “own” anything – ownership rests with the providers.
Marketing the Qualities of Services Right through Service Marketing
With the growing spread and range of services, of course also service marketing deserves a mention. Service marketing promotes the qualities of services that we have just discussed – the intangible benefits and offerings that a company offers to its target markets. Service marketing can focus on promoting a service as a stand-alone offering (think, for instance, of a pure service company such as Facebook, or your local barber shop). But service marketing can also promote complementary services to tangible products sold by the company.
As service marketing is concerned with the various qualities of services described above (intangibility, inseparability, variability, perishability, user participation, and lack of ownership), it needs to take an inherently different approach than marketing strategies for tangible goods. For this reason, there is much greater focus on people (who provide the service) and the process (which becomes much more important than the non-tangible outcome). We therefore often use the 7 P’s of the service marketing mix rather than the standard 4 P’s (product, price, place, promotion). The additional factors included here are people, process, and physical evidence – after all, nearly every service has some physical component to it.
As you have seen, services are indeed special. The definition of services indicates that services can take many forms. Also, services have characteristics that make them unique – and they will become ever more important for the world economy. Therefore, it is crucial to have an understanding of what is meant when talking about services, but also of the many forms services can take.