Edumarz

What are services? Explain their distinct characteristics.

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By Harshvardhan, the Subject Matter Expert at Edumarz

Solution: Services are essentially intangibles. Their purchase does not result in the ownership of anything physical. For example, you can only seek advice from the doctor, you cannot purchase him. Services are all those economic activities that are intangible and imply an interaction to be realised between the service provider and the consumer.

There are five basic features or characteristics of services. These features also distinguish them from goods and are known as the five I’s of services. These are discussed as below:

  1. Intangibility: Services are intangible, i.e., they cannot be touched. They are experiential in nature. One cannot taste a doctor’s treatment, or touch entertainment. One can only experience it. An important implication of this is that the quality of the offer can often not be determined before consumption and, therefore, purchase. It is, therefore, important for the service providers that they consciously work on creating the desired service so that the customer undergoes a favourable experience. For example, treatment by a doctor should be a favourable experience.
  2. Inconsistency: The second important characteristic of services is inconsistency. Since there is no standard tangible product, services have to be performed exclusively each time. Different customers have different demands and expectations. Service providers need to have an opportunity to alter their offer to closely meet the requirements of the customers. This is happening, for example, in the case of mobile services. Inseparability: Another important characteristic of services is the simultaneous activity of production and consumption is performed. This makes the production and consumption of services seem to be inseparable. While we can manufacture a car today and sell it after, say, a month; this is often not possible with services that have to be consumed as and when they are produced. Service providers may design a substitute for the person by using appropriate technology but the interaction with the customer remains a key feature of services. Automated Teller Machines (ATMs) may replace the banking clerk for the front office activities like cash withdrawal and cheque deposit. But, at the same time, the presence of the customer, is required and his/her interaction with the process has to be managed.
  3. Inseparability: Another important characteristic of services is the simultaneous activity of production and consumption is performed. This makes the production and consumption of services seem to be inseparable. While we can manufacture a car today and sell it after, say, a month; this is often not possible with services that have to be consumed as and when they are produced. Service providers may design a substitute for the person by using appropriate technology but the interaction with the customer remains a key feature of services. Automated Teller Machines (ATMs) may replace the banking clerk for the front office activities like cash withdrawal and cheque deposit. But, at the same time, the presence of the customer, is required and his/her interaction with the process has to be managed.
  4. Inventory (Less): Services have little or no tangible components and, therefore, cannot be stored for future use. That is, services are perishable and providers can, at best, store some associated goods but not the service itself. This means that the demand and supply need to be managed as the service has to be performed as and when the customer asks for it. They cannot be performed earlier to be consumed at a later date. For example, a railway ticket can be stored but the railway journey will be experienced only when the railways provide it.
  5. Involvement: One of the most important characteristics of services is the participation of the customer in the service delivery process. A customer has the opportunity to get the services modified according to specific requirements.

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