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Services: Unique Characteristics

Services have unique characteristics including intangibility, inseparability of production and consumption, perishability, and variability. They are difficult to evaluate prior to purchase. Services can be classified based on the degree of customer interaction or searchability. Search goods can be evaluated before purchase through inspection. Experience goods are evaluated after purchase. Credence goods are difficult to evaluate even after consumption due to lack of knowledge or expertise of the consumer. Most services have high experience or credence properties, making them high involvement purchases for consumers.

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Vivek Rao
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68 views2 pages

Services: Unique Characteristics

Services have unique characteristics including intangibility, inseparability of production and consumption, perishability, and variability. They are difficult to evaluate prior to purchase. Services can be classified based on the degree of customer interaction or searchability. Search goods can be evaluated before purchase through inspection. Experience goods are evaluated after purchase. Credence goods are difficult to evaluate even after consumption due to lack of knowledge or expertise of the consumer. Most services have high experience or credence properties, making them high involvement purchases for consumers.

Uploaded by

Vivek Rao
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Definition.

A type of economic activity that is intangible, is not stored and does not result in
ownership. A service is consumed at the point of sale. Services are one of the two key
components of economics, the other being goods.

Services: Unique characteristics[edit]


A distinctive feature of services is that production and consumption cannot be separated.

Throughout the 1980s and 1990s, the so-called unique characteristics of services dominated
much of the literature.
The four most commonly cited characteristics of services are: [20]
Intangibility services lack physical form; they do not interact with any our senses in a
conventional way, they cannot be touched or held.
Implications of intangibility: Ownership cannot be transferred, value derives from
consumption or experience, quality is difficult to evaluate prior to consumption or
purchase.
Inseparability production and consumption cannot be separated (compared with goods
where production and consumption are entirely discrete processes)
Implications of inseparability: Services are typically high contact systems and are labour-
intensive; fewer opportunities to transact business at arm's length, fewer opportunities to
substitute capital for labour; subject to human error.
Perishability service performances are ephemeral; unlike physical goods, services
cannot be stored or inventoried.
Implications of perishability: Demand is subject to wide fluctuations, no inventory to serve
as a buffer between supply and demand; unused capacity cannot be reserved; high
opportunity cost of idle capacity.
Variability (also known as heterogeneity) services involve processes delivered by
service personnel and subject to human variation, customers often seek highly
customised solutions, services are inherently variable in quality and substance.
Implications of variability: Service quality is difficult to manage; fewer opportunities to
standardise service delivery.
The unique characteristics of services give rise to problems and
challenges that are rarely paralleled in product marketing.

Classification of goods and services


There are many ways to classify services. One classification
considers who or what is being processed and identifies three classes of services: people
processing (e.g. beauty services, child care, medical services); mental stimulus
processing (e.g. education services, counselling services, life-coaching), possession
processing (e.g. pet care, appliance repair, piano tuning) and information processing (e.g.
financial services, data warehousing services).[21][22] Another method used to classify
services uses the degree of customer interaction in the service process and classifies
services as high contact (e.g. hospitality, dental care, hairdressing) or low contact (e.g.
telecommunications, utility services).[23]
Both economists and marketers make extensive use of the
Search Experience Credence (SEC) classification of
goods and services. The classification scheme is based on the
ease or difficulty of consumer evaluation activities and identifies
three broad classes of goods.[24][25]

Search goods possess qualities that can be evaluated prior to


consumption through direct inspection of the merchandise.

Search goods: are those which possess attributes that can evaluated prior to purchase or
consumption. Consumers rely on prior experience, direct product inspection and other
information search activities to locate information that assists in the evaluation process.
Most products fall into the search goods category (e.g. clothing, office stationery, home
furnishings).
Experience goods: are goods or services that can be accurately evaluated only after the
product has been purchased and experiences. Many personal services fall into this
category (e.g. restaurant, hairdresser, beauty salon, theme park, travel, holiday).
Credence claims: are goods or services that are difficult or impossible to evaluate even
after consumption has occurred. Evaluation difficulties may arise because the consumer
lacks the requisite knowledge or technical expertise to make a realistic evaluation or,
alternatively because the cost of information-acquisition is prohibitive or outweighs the
value of the information available. Many professional services fall into this category (e.g.
accountant, legal services, medical diagnosis/treatment, cosmetic surgery). These goods
are called credence products because the consumer's quality evaluations depend
entirely on the trust given to the product manufacturer or service provider. [26]
While some services may possess a number of
search attributes (tangible dimensions), most
services are high in experience or credence
properties. Empirical studies have shown that
consumers' perceived risk increases along the
search-experience-credence continuum.[27] The
implication is that services tend to be high
involvement decisions where the consumer
invests more heavily in information search activities
during the purchase decision.

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