Towards Systematic Understanding of Services
January 7 (Monday) 2008
Naoki Nagashima
Senior Research Fellow
Summary
- It is said that services are wide-ranging. It is true that various services such as medical, education, financial, and entertainment-related each have different characteristics, and there is little awareness of common ground in the business practices, such as marketing and management.
- Tracing the history of service research, however, reveals that attempts to systematically understand services as a whole and break down into patterns using certain assessment axes have been made. Moreover, unexpected similarities have been found among different services such as the perception of costs or risks that customers recognize. Encouraging the systematic understanding of services is significant in terms of research; in addition, it is also meaningful for company practices to develop a complete picture and promote comprehensive understanding.
Traditional Thinking Regarding Services
The leading way of thinking in the classification of services comes from C. Lovelock. Services are divided into four categories by two axes. One is whether “the action target of the service is a person or a person’s possession” and the other is whether “the service itself is tangible or intangible”. This method of division is conceptually clear. However, it involves some problems in terms of reality and adaptability. First of all, it is difficult to classify B-to-B services such as accounting, legal work and consulting. In addition, the tangible/intangible assessment axis often causes some ambiguity when it is applied to individual services. For example, we are not likely to be persuaded by the example Lovelock classified as “funeral services are tangible, and educational services are intangible”.
H. Assael provides an example of simultaneous division of objects and services, with involvement and perceived differences (in quality) as its assessment axes. These axes are based on consumers’ attitude of mind, and as such they are effective in understanding perceived costs. However, a survey I conducted has revealed that Assael’s division is not so clear. All services seem to have similar distributions of involvement that are centered on “neutral” and are nearly symmetrically. On the other hand, the averages of “perceived differences” are above “neutral” for all services. Differences in average among services, however, are smaller than among involvement.
It is implied that segmentation within the same service would be more effective than breaking down services for these assessment axes. Here we also find the reason why segmentation and targeting within services are emphasized more than systematic understand of services.
Breaking Down by “Degree of Devotion” and “Frequency of Use”
Among services, there are those which one wants to spend a certain degree of time enjoying, and those which one wants to finish as quickly as possible. Entertainment-related services such as theme parks and cinemas are examples of the former, while dental care is an example of the latter.
This assessment axis is named “degree of devotion”, and the former services with a high degree of devotion can be classified as “content-enjoying type”, while the latter services with a low degree of devotion can be classified as “problem-resolving type”. The “degree of devotion” reflects consumers’ attitude of mind, and has turned out to be a useful assessment axis to analyze the weight of factors in perceived costs and risks.
If the degree of devotion is low, the importance of time cost and psychological cost increases. In other words, this implies that services with a low degree of devotion could receive higher prices by lowering consumers’ time cost and psychological cost.
One important assessment axis that can characterize services is “frequency of use” (“usage frequency” hereafter). Services with high usage frequency can increase the repeater ratio through customer satisfaction. In terms of marketing, this is an important strategy. On the other hand, services with low usage frequency can get better reviews through word of mouth and so on, and the condition for success is expanding the user base. In other words, for the former the key in terms of strategy is the satisfaction effect, and for the latter the key is the reputation effect.
Following the results of the consumer survey questionnaire, plotting the average values of the degree of devotion and usage frequency with respect to eight services produces the graph below (refer to the PDF file). Here B-to-B services are mostly the problem-resolving type, and as such are expected to show top-bottom distribution on the left side.
