Characteristics Of Services Influence A Service Marketing Essay

1826 words (7 pages) Essay

1st Jan 1970 Marketing Reference this

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This essay critically discusses how the characteristics of services influence international expansion of service organisations. It will shed light on the definition of service and its categories, followed by an explanation on what service organisation strategy is and also define international expansion. And then will mention the service characteristics and attempt to link with the definitions and explanations to discuss how the characteristics influence international expansion.

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Service is the act of doing a task for someone out of kindness or profit; most authors have formed their definitions around this meaning. According to Lovelock and Wirtz (2004), it is an economic activity offered by one party to another in form of a performance that creates value and provides benefits for customers. Services are an important and growing part of the economy. Young and Erdem (1996) stated that the design of an efficient strategy for marketing services to international markets is one of the major challenges to the international marketer.There are four categories of services which are defined depending on the nature of the service act and who or what the service is directed to, they are as follows:

People processing involves the service being performed on an individual. Swartz and Lacobucci (2000) discuss that people processing services involve the service provider performing a tangible act on a customer’s body, for example, a haircut. This shows that the nature of the service is tangible and it is directed towards the customer.

Possession processing is when the service is directed towards an individual’s property, Verma (2012) states that when service actions are directed towards physical objects owned by customers, such as cars or shoes, the service becomes possession processing. The nature of the service here is tangible but directed to property.

Mental stimulus processing, these services are directed to the minds of a customer and purely intangible. According to Wirtz (2012) these services have the power to influence behaviour and shape attitudes by affecting people’s minds. Examples of such services include education, theatre performances among others.

Information processing involves the use of technology or brain power towards customers’ assets. Verma (2012) argues that information being the service product is purely intangible and very critical to the success of services like financial services, market research and accounting. Verma’s argument clearly states a lot of consideration which involves brain power which must be made in order to be successful.

The above explained categories are what define what kind of business service organisations are based on and what kind of strategy they are likely to employ.

The service strategy is always backed by a vision. This vision can be depicted as located at the top of a pyramid consisting of a mission and various core elements of a strategy (Motwani and Sower, 2006). Basically it defines, in general, how companies differentiate themselves from their competitors of service offers, since the strategy is dependent on the category of service they are based on. The strategy will however have to adapt to different situation, such as international expansion.

International expansion is the series of steps taken by an enterprise, either acting alone or in consort with partners to enter a foreign market with a view to setting up or acquiring operations in that country (Nejati and Nejati 2009). Also referred to as globalisation, it is a business trait growing at an alarming pace. There are many routes for expansion such as, Joint venture, Sales or Marketing alliances, Greenfield investment, Acquisitions and Mergers (The Economist, 2007). A variety of strategies will have to be adapted by companies to enter new markets and obtain international growth. Most international strategies and theories can be used in both service firms and manufacturing sector but the difference between goods and services affects the international expansion strategy (Sarathy, 1994).

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The company’s international operation success is dependent on the choice of entry mode into a foreign market; these include export mode, contractual mode and foreign direct investment mode (Wagner, 2009). “It has been argued that the single most important difference between products and services is the characteristic of intangibility. As a matter of fact, it has been said that intangibility is the key to determining whether or not an offering is a service or product” (Zeithaml and Bitner, 1996). This characteristic has a profound effect on the marketing of services (Lovelock, 1991; Rushton and Carson, 1989). According to Levitt (1981), difficulties arise from this intangibility which lead to quality control problems for the producer and evaluation problems for the international market. It is this intangibility, or lack of physical attributes, that most likely is the reason for service heterogeneity, inseparability and perishability.

Intangibility, services are intangible and do not have a physical existence. Hence services cannot be touched, held, tasted or smelt. This is the most defining feature of a service and that which primarily differentiates it from a product. Also, it poses a unique challenge to those engaged in marketing a service as they need to attach tangible attributes to an otherwise intangible offering (Management Study, 2008). The intangible characteristic makes it possible for service firms to expand globally since the service has no physical form and therefore can be differentiated and used to an advantage. Attendant services provided are emerging as a key differentiator in the mind of the consumers due to the increasing homogeneity in product offerings (Management Study, 2008). For example in the category of people processing, the Bumrungrad hospital in Bangkok offers the same intangible services as other hospitals but its physical clues are what make its intangible services tangible; from the hospitality offered to the patients to the complimentary facilities within the hospital, such as the fast food joints and coffee shops. Most hospitals lack such facilities and rarely meet up to such hospitality. This allows them to distinguish themselves from competitors. To further have an upper hand in an international market, customers could be persuaded through images in advertising and branding, as well as documents showing performances evidence and offered guarantees (Lovelock and Wirtz, 200).

Heterogeneity, due to the nature of service, being more of a skilful expressed commodity, it varies to every person it is offered to, making it heterogeneous. Services are absolutely variable. Rama (2011) states that it is almost impossible to have similar services from the same seller the second time, even though the customers experience it instantaneously; no two customers can receive identical services. For example in the mental stimulus processing, a lecturer’s service is received differently by different students depending on culture, interests among other factors. These factors will appeal to the lecturer’s style of teaching. According to Rama (2011) and Srinivasan (2004), since innovation is the key to success, the service provider can deliver better experiences to delight customers by focusing on training of employees and reducing the role of the human element. Reducing on the human element means concentrating more on the physical element that will appeal to the customers, Rama (2011) emphasises on the pleasant and neat appearance of the employees, as Raymond and Fisk (2008) further insist on taking customer handling skills into account in employee training, evaluation and compensation. Going about this allows a service company to set itself apart from the competition by being more customer oriented as opposed to the traditional operation oriented service firms.

Inseparability, a service is inseparable from the source that provides it. Its very act of being created needs the source, be it a person or machine, to be present. Meaning, production and consumption happen simultaneously with services (Botten and Neil, 1946). This means, a service provider and the person or a possession that has to be serviced must both be present. This characteristic makes customers temporary employees since getting a good experience out of the service will also depend on the customer’s contribution. This is why Lovelock and Wirtz (2004) state that poor task performance by customers may hurt productivity, spoil service experience and restrain benefits since customers interact with provider’s equipment, facilities and systems. For example, it will be up to the customer in need of a nose surgery to be clearly detailed so as to achieve the results they wish to see. According to Lovelock and Wirtz (2004) the contribution of both parties is essential and the appearance, attitude and behaviour of service employees and other customers can form the experience and affect satisfaction. The service company will have to be more customers friendly and oriented by working on their employees’ people handling skills.

Perishability, “most services are perishable, that is, they cannot be produced and stored before consumption; they exist only at the time of their production” (Raymond and Fisk, 2008, p.9). Services unlike products cannot be stored nor recovered, they only exist as the act is being done. For example with hospitals, physicians and even hotels, once an appointment is made a time is set for it and when the time expires so will the service. Service companies looking to expand abroad could choose to be different and give customers second chances or extensions. This will make them stand out and separate them from their competitors and becoming a recommended agency by most customers. As Raymond and Frisk (2008) point out, this characteristic is the major source of many supply and demand difficulties that service marketers need to overcome. A service company looking to expand abroad should take this characteristic into consideration to achieve a competitive edge.

With characteristics of services varying from every provider who delivers them and at the same time been received and experienced differently with every consumer, the emphasis seems to be on how skilful the service provider is. The skills of the service provider are meant to be centred on customer satisfaction, more than anything, they should respond to customers’ needs other than the basic advertised operations. Service firms seeking to expand abroad should take that aspect into consideration, because in order for the characteristics to be successful in influencing international expansion they must all work on pleasing the customer.

This essay critically discusses how the characteristics of services influence international expansion of service organisations. It will shed light on the definition of service and its categories, followed by an explanation on what service organisation strategy is and also define international expansion. And then will mention the service characteristics and attempt to link with the definitions and explanations to discuss how the characteristics influence international expansion.

Service is the act of doing a task for someone out of kindness or profit; most authors have formed their definitions around this meaning. According to Lovelock and Wirtz (2004), it is an economic activity offered by one party to another in form of a performance that creates value and provides benefits for customers. Services are an important and growing part of the economy. Young and Erdem (1996) stated that the design of an efficient strategy for marketing services to international markets is one of the major challenges to the international marketer.There are four categories of services which are defined depending on the nature of the service act and who or what the service is directed to, they are as follows:

People processing involves the service being performed on an individual. Swartz and Lacobucci (2000) discuss that people processing services involve the service provider performing a tangible act on a customer’s body, for example, a haircut. This shows that the nature of the service is tangible and it is directed towards the customer.

Possession processing is when the service is directed towards an individual’s property, Verma (2012) states that when service actions are directed towards physical objects owned by customers, such as cars or shoes, the service becomes possession processing. The nature of the service here is tangible but directed to property.

Mental stimulus processing, these services are directed to the minds of a customer and purely intangible. According to Wirtz (2012) these services have the power to influence behaviour and shape attitudes by affecting people’s minds. Examples of such services include education, theatre performances among others.

Information processing involves the use of technology or brain power towards customers’ assets. Verma (2012) argues that information being the service product is purely intangible and very critical to the success of services like financial services, market research and accounting. Verma’s argument clearly states a lot of consideration which involves brain power which must be made in order to be successful.

The above explained categories are what define what kind of business service organisations are based on and what kind of strategy they are likely to employ.

The service strategy is always backed by a vision. This vision can be depicted as located at the top of a pyramid consisting of a mission and various core elements of a strategy (Motwani and Sower, 2006). Basically it defines, in general, how companies differentiate themselves from their competitors of service offers, since the strategy is dependent on the category of service they are based on. The strategy will however have to adapt to different situation, such as international expansion.

International expansion is the series of steps taken by an enterprise, either acting alone or in consort with partners to enter a foreign market with a view to setting up or acquiring operations in that country (Nejati and Nejati 2009). Also referred to as globalisation, it is a business trait growing at an alarming pace. There are many routes for expansion such as, Joint venture, Sales or Marketing alliances, Greenfield investment, Acquisitions and Mergers (The Economist, 2007). A variety of strategies will have to be adapted by companies to enter new markets and obtain international growth. Most international strategies and theories can be used in both service firms and manufacturing sector but the difference between goods and services affects the international expansion strategy (Sarathy, 1994).

The company’s international operation success is dependent on the choice of entry mode into a foreign market; these include export mode, contractual mode and foreign direct investment mode (Wagner, 2009). “It has been argued that the single most important difference between products and services is the characteristic of intangibility. As a matter of fact, it has been said that intangibility is the key to determining whether or not an offering is a service or product” (Zeithaml and Bitner, 1996). This characteristic has a profound effect on the marketing of services (Lovelock, 1991; Rushton and Carson, 1989). According to Levitt (1981), difficulties arise from this intangibility which lead to quality control problems for the producer and evaluation problems for the international market. It is this intangibility, or lack of physical attributes, that most likely is the reason for service heterogeneity, inseparability and perishability.

Intangibility, services are intangible and do not have a physical existence. Hence services cannot be touched, held, tasted or smelt. This is the most defining feature of a service and that which primarily differentiates it from a product. Also, it poses a unique challenge to those engaged in marketing a service as they need to attach tangible attributes to an otherwise intangible offering (Management Study, 2008). The intangible characteristic makes it possible for service firms to expand globally since the service has no physical form and therefore can be differentiated and used to an advantage. Attendant services provided are emerging as a key differentiator in the mind of the consumers due to the increasing homogeneity in product offerings (Management Study, 2008). For example in the category of people processing, the Bumrungrad hospital in Bangkok offers the same intangible services as other hospitals but its physical clues are what make its intangible services tangible; from the hospitality offered to the patients to the complimentary facilities within the hospital, such as the fast food joints and coffee shops. Most hospitals lack such facilities and rarely meet up to such hospitality. This allows them to distinguish themselves from competitors. To further have an upper hand in an international market, customers could be persuaded through images in advertising and branding, as well as documents showing performances evidence and offered guarantees (Lovelock and Wirtz, 200).

Heterogeneity, due to the nature of service, being more of a skilful expressed commodity, it varies to every person it is offered to, making it heterogeneous. Services are absolutely variable. Rama (2011) states that it is almost impossible to have similar services from the same seller the second time, even though the customers experience it instantaneously; no two customers can receive identical services. For example in the mental stimulus processing, a lecturer’s service is received differently by different students depending on culture, interests among other factors. These factors will appeal to the lecturer’s style of teaching. According to Rama (2011) and Srinivasan (2004), since innovation is the key to success, the service provider can deliver better experiences to delight customers by focusing on training of employees and reducing the role of the human element. Reducing on the human element means concentrating more on the physical element that will appeal to the customers, Rama (2011) emphasises on the pleasant and neat appearance of the employees, as Raymond and Fisk (2008) further insist on taking customer handling skills into account in employee training, evaluation and compensation. Going about this allows a service company to set itself apart from the competition by being more customer oriented as opposed to the traditional operation oriented service firms.

Inseparability, a service is inseparable from the source that provides it. Its very act of being created needs the source, be it a person or machine, to be present. Meaning, production and consumption happen simultaneously with services (Botten and Neil, 1946). This means, a service provider and the person or a possession that has to be serviced must both be present. This characteristic makes customers temporary employees since getting a good experience out of the service will also depend on the customer’s contribution. This is why Lovelock and Wirtz (2004) state that poor task performance by customers may hurt productivity, spoil service experience and restrain benefits since customers interact with provider’s equipment, facilities and systems. For example, it will be up to the customer in need of a nose surgery to be clearly detailed so as to achieve the results they wish to see. According to Lovelock and Wirtz (2004) the contribution of both parties is essential and the appearance, attitude and behaviour of service employees and other customers can form the experience and affect satisfaction. The service company will have to be more customers friendly and oriented by working on their employees’ people handling skills.

Perishability, “most services are perishable, that is, they cannot be produced and stored before consumption; they exist only at the time of their production” (Raymond and Fisk, 2008, p.9). Services unlike products cannot be stored nor recovered, they only exist as the act is being done. For example with hospitals, physicians and even hotels, once an appointment is made a time is set for it and when the time expires so will the service. Service companies looking to expand abroad could choose to be different and give customers second chances or extensions. This will make them stand out and separate them from their competitors and becoming a recommended agency by most customers. As Raymond and Frisk (2008) point out, this characteristic is the major source of many supply and demand difficulties that service marketers need to overcome. A service company looking to expand abroad should take this characteristic into consideration to achieve a competitive edge.

With characteristics of services varying from every provider who delivers them and at the same time been received and experienced differently with every consumer, the emphasis seems to be on how skilful the service provider is. The skills of the service provider are meant to be centred on customer satisfaction, more than anything, they should respond to customers’ needs other than the basic advertised operations. Service firms seeking to expand abroad should take that aspect into consideration, because in order for the characteristics to be successful in influencing international expansion they must all work on pleasing the customer.

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