CLASSIFICATION OF SERVICES CLASSIFICATION OF SERVICES

K V PRABHAKAR

CLASSIFICATION OF SERVICES CLASSIFICATION OF SERVICES

THE TRADITIONAL METHOD OF CLASSIFICATION OF SERVICES:

THE FOLLOWING CHART DEPICTS THE TRADITIONAL METHOD:

CONTD., CONTD.,

MODERN METHODS OF CLASSIFYING SERVICES

SOME PROMINENT WAYS OF CLASSIFYING SERVICES INCLUDE:

CONTD., CONTD., 1. UNDERSTANDING THE NATURE OF

SERVICE: Two parameters are used in this

classification (a) Who or what is the direct recipient of the services?

(b) What is the nature service act? The following chart shows this

classification:

CONTD., CONTD.,

2. THE DEGREE OF TANGIBILITY OF SERVICE:

Some services are more tangible than others For example food in a restaurant is a tangible thing,

though the service part may not be The effect of a restaurant visit may be linked with the

tangible items and the satisfied derived from them. But in a consultant’s job, a lot of things remain intangible even after the consultancy is over

Thus different services could be classified on their extent or degree of tangibility.

McGraw-Hill/Irwin ©2003. The McGraw-Hill Companies. All Rights Reserved

Figure 1.1Tangibility Spectrum

TangibleDominant

IntangibleDominant

SaltSoft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teaching

Fast-foodOutlets

Fast-foodOutlets

CONTD., CONTD.,3.WHETHER THE SERVICE IS

DIRECTED AT THE CUSTOMER OR HIS/HER POSSESSIONS:

Some services are performed on the customer or with his/her participation as a part of the service delivery, as in the case of haircut, hotel check-in etc.,

On the other hand, some are provided to his/her possessions such as car, camera or TV repairs.

Strategic Service Classification (Nature of the Service Act)

Strategic Service Classification (Nature of the Service Act) Direct Recipient of the ServiceNature of the Service Act People Things People’s bodies: Physical possessions: Health care Freight transportation Passenger transportation Equipment repair and maintenance

Tangible actions Beauty salons Veterinary care Exercise clinics Janitorial services Restaurants Laundry and dry cleaning

People’s minds: Intangible assets: Education Banking

Intangible actions Broadcasting Legal services Information services Accounting Theaters Securities Museums Insurance

CONTD., CONTD., This classification helps us to clarify

whether : 1.Physical or mental presence is

necessary for the service 2. If necessary, should it be at the

beginning or throughout or at the end Accordingly, the location and schedule

of the service can be determined In low contact services where the

presence is not necessary, the locations can be far away

Mail-orders and home deliveries are possible

CONTD., CONTD., If presence is necessary, high contact

becomes important Then physical facilities and processes

also become more significant Presence provides opportunities for

heightened levels of satisfaction, consequent loyalty and world of mouth publicity

CONTD., CONTD., 4.THE TIME AND PLACE OF SERVICE

DELIVERY: The location can be either the service

provider’s location or the customer’s home or office

For example, the pest control has to be on the site but software services can be provided via internet from any location

Similarly, medical operations have to performed at specific sites recommended by the doctor.

CONTD., CONTD., 5.LEVEL OF CUSTOMIZATION VERSUS

STANDARDIZED: Services can be customized like a theme

birthday party at a hotel or restaurant, or standardized like a standard meal at a south Indian restaurant

Some services tend to be more customized like lawyer’s or doctor’s consultation, whereas there are a few standardized services like some of NIIT computer courses or a McDonald’s menu, ambience and service pattern.

Strategic Service Classification (Customization and Judgment)

Strategic Service Classification (Customization and Judgment) Extent to Which Service Characteristics Are Customized

Extent to Which Personnel

Exercise Judgment in Meeting

Customer Needs High Low

Professional services Education (large classes)

Surgery Preventive health programs

Taxi services Family restaurant

High Gourmet restaurant

Telephone service Public transportation

Hotel services Spectator sport

Low Retail banking (excl. major loans) Movie theater

Cafeteria Institutional food service

CONTD., CONTD., Customization is thus another method of classifying

services based on two dimensions: Extent of customization Extent of judgment/discretion used during service

delivery Low customization is when the service remains

unchanged whoever the customer may be TV, Radios, movies, car servicing etc., belong to this category

Very high customization is when the service is practically tailored to the requirements of the customer, as in the case of legal advice or hospital treatment

CONTD., CONTD., Where discretion is high, training of staff and

control of process are important Where both customization and discretion are

low, standardized procedures and systems may be appropriate

Consistency of delivery, standardization and use of equipment can be attempted if the service moves to the bottom right quadrant

If a service can be moved to the left top quadrant, here is enhancement in value A WOW experience is possible

CONTD., CONTD., With high levels of computerization and “fuzzy logic”,

high levels of customization has become a norm “A market segment of one” captures this trend Students are offered a “cafeteria” of subjects from

which they may choose specified number to complete a course

Mikissimes Design system called the “eye tailor” in USA takes a digital picture of the customer’s face and then adjusts size, shape and color of lens, and offers options for nose-bridge, hinges and arms of the frame designs

Electronic kiosks enable customers to design labels and greeting cards on the spot, composing their own messages

CONTD., CONTD., 6. FORMAL OR INFORMAL RELATIONSHIP WITH

CUSTOMERS: Generally, entry to clubs require formal

membership The Disney world or a move theatre only

requires people to buy a tick for entry, with no record of the name of the customer or any particulars

The telephone and electricity supplying companies require the name,address and other particulars of customers

CRM is very significant in service companies.

CONTD., CONTD., Services like libraries, insurance, banking are available

to those formally approved for the service by a specific service producer, while radio and TV programs may be received by any person without the knowledge of the service producer

Encrypted TV called “pay channels” need membership Airlines try to increase membership through frequent

flyer program Members of hospital get periodical free check ups,

bulletins on health care or fitness facilities The following chart indicates this classification:

Strategic Service Classification (Relationship with Customers)

Strategic Service Classification (Relationship with Customers) Type of Relationship between Service Organization and Its CustomersNature of Service Delivery “Membership” relationship No formal relationship

Insurance Radio station Telephone subscription Police protection

Continuous delivery Electric Utility Lighthouse

of service Banking Public Highway

Long-distance phone calls Restaurant Theater series subscription Pay phone

Discrete transactions Transit pass Toll highway Sam’s Wholesale Club Movie theater Airline frequent flyer Public transportation

CONTD., CONTD., 7.THE EXTENT TO WHICH DEMAND AND SUPPLY

FLUCTUATE: Some services have steady demand like a downtown

restaurant Some others have highly fluctuating demand based on

the time of the day or season like electric power, the demand for which increases or decreases with the weather.

In North Indian plains, coolers and air conditioners are of great demand in the hot months,d and room heaters in the winter months

In the South generally, the weather is more reasonable, except for a couple of months. The power demand fluctuates accordingly.

CONTD., CONTD.,

Demand and supply factors are important in service business because of the characteristic of perishability

The chart below indicates this:

Strategic Service Classification (Nature of Demand and Supply)

Strategic Service Classification (Nature of Demand and Supply) Extent of Demand Fluctuation over Time

Extent to which Supply

Is Constrained Wide Narrow

Electricity Insurance

Peak demand can Telephone Legal services

usually be met Police emergency Banking

without a major delay Hospital maternity unit Laundry and dry cleaning

Tax preparation Fast food restaurant

Peak demand regularly Passenger transportation Movie theater

exceeds capacity Hotels and motels Gas station

CONTD., CONTD., 8.INTERACTION WITH PEOPLE OR INANIMATE

OBJECTS/ENVIRONMENT: Some transactions could be done on the phone, like ordering

a new cheque book from a bank Others need the presence of the customer on site, like taking

a flight or eating out Depending on the level and frequency of the customer contact

required, one can classify services into different categories There may be mixed models, where some contact is needed,

but after the customer is on his/her own, like a fast food self-service model.

CONTD., CONTD., 9. LABOR INTENSITY:

Yet another classification is based on the amount of labor intensity in service delivery and the extent of interaction with the customer:

CONTD CONTD If interaction is low, standard operating

procedures can be evolved If interaction is high, the quality of the

response to customer intervention is important

If the labor intensity is high, hiring and training methods as well as scheduling become important

CONTD., CONTD.,

10. PROXIMITY: Some services require the physical proximity of the customer and the service provider. Some do not require this.

Physical proximity may be made possible by either the user or the provider or both

CONTD., CONTD., Some services like couriers, consultancy and

car repairs could be in more than one quadrant. The service provider can be mobile or immobile

Advancements electronics technology is making long-distance provision of services (bottom right quadrant) possible

The internet will bring many services into the bottom right quadrant

Education, consultations, shopping, library references requiring physical and mental presence become possible through the Internet, with both the service provider and the customer being immobile

CONTD., CONTD., Services can cross international

boundaries easily Multiple outlets or franchises improve

the mobility of the provider Mobility of the service provider

improves ease of access but with the Internet, there is effective mobility, despite real immobility

CONTD., CONTD.,

11. COMPLEXITY: A simple classification is concerning the dimensions of the complexity of services and divergence

Complexity refers to the number of steps and sequences in process

divergence refers to the extent of freedom available in taking a step

SUMMING UP SUMMING UP

The usefulness of these classifications or typologies of services depends on how we use them.

If used strategically, for example in making choices which service markets to enter, they may point out if the new area is a ‘core competence's area for the company or not.

Village Volvo’s Service ClassificationVillage Volvo’s Service Classification Nature of the service act

Relationship with customers

Customization and judgement

Nature of demand and supply

Method of service delivery

Xpresso Lube’s Service ClassifictionXpresso Lube’s Service Classifiction Nature of the service act

Relationship with customers

Customization and judgement

Nature of demand and supply

Method of service delivery

Figure 13: Major Categories of Services

Operational Services(i.e., Traditional Service &Support)

Enhancement Services(i.e., “Value-added”)

Professional Services(i.e., Major Change in Process)

Essence of Service Facilitate on-going use ofinformation technology

Increase the value from useof information technology

Major change in adoption oruse of new technology

Orientation On-going operations Project Major program

Examples Hardware Maintenance

Software Support

Installations— relocations

Help desk support

Education & Training

Network Integration

Performance Tuning

Migration Services

Disaster AvoidanceRecovery

Staging Services

BPR Consulting

Systems Integration

Major ApplicationDevelopment

Outsourcing

IT Strategy Consulting

Source: R. Johnson, 1999

Figure 13, continued:Major Categories of Services

Operational Services (i.e.,Traditional Service & Support)

Enhancement Services(i.e., “Value-added”)

Professional Services(i.e., Major Change in Process)

Characteristics Straight-forward— Standardized

Minimal Career Risk

Low $ per Device Contracts

No Change in Operations

Easy to Substitute Vendors

Somewhat Customized

Moderate Career Risk

Moderate $ Contracts

Moderate Change inOperations

Moderately Difficult/Easy toSwitch Vendors

Complex, each deal unique

Significant Career risk

High $ contracts

Major change in operations

Difficult to extract/switchvendors

Sold By Product— Oriented sales force Combination of systems andspecialists sales force

Dedicated consultant salesforce and/or alliance withstrategic consultingpartner

Source: R. Johnson, 1999

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