Example Economics Essay:
Service Features and Characteristics
A service refers to act or a performance done by one party to another party. As economic activities services create value and benefit the consumers at specific times through the fulfillment of the desired change (Wilson, Zeithaml, Bitner & Gremler, 2012). Wilson, Zeithaml, Bitner, and Gremler (2012) maintains that the term is not limited to common services like legal services, beauty services, medical services and so on. The concept is wider in scope and extends to include so many forms of services that are offered. Some of the characteristics of services as outlined by Diamond and Pintel (2010) include intangibility, inseparability, perishability, variability, heterogeneity, ownership, and quality of measurement and the nature of demand. This paper looks characteristics and then gives a solution to the challenges identified.
When one buys something tangible like a bicycle, they can see it touch it and even feel it. They can even give it a test ride. The feature of the products as Palmer (2009) holds enables them to be tangible which then provide information to consumers thereby enabling them to do a quick comparison of one product with the other. A consumer can easily compare two different sets of bicycles before deciding to buy one based on their tangible characteristics (Bryson & Daniels, 2007). The features make it easier for the consumers to make very quick purchasing decisions objectively. On the contrary, services are intangible. They cannot be experienced or consumed until the consumers make the purchase (Moeller, 2010). This, as Palmer, (2014) argues, denies a consumer the luxury of doing a proper comparison before selecting the best alternative as is the case with products. The result is as Clarke (2010) maintains is always the feeling that purchasing decision has been made without adequate information. In this case, the customer can only be empowered to make the decision of not making a repeat purchasing after consuming the service which sometimes results in a lot of regret and dissatisfaction (Weisman, 2012).
The challenge of intangibility can be overcome through proper communication as Jobber and Ellis-Chadwick (2016) state. Customers can get communication from several sources. Consumers can rely on customer testimonials to ensure that they do not get a bad experience. They can do that by talking to customers who have experienced the same service and getting their opinion on the quality of the service that was received (Peterson, 2007). They can also rely on customer reviews (Bryson & Daniels, 2007). Most companies have customer review segments where customers leave their comments concerning the quality of service received or product purchased. Such information as Connett, Abratt and Cant, (2010) assert, can help the consumers in deciding the best service to purchase. Besides that, consumers can look at company ratings. Companies like Uber, have made this possible by ensuring that all their customers are rated at the completion of the journey. This as Sherlekar, Prasad and Victor (2010) explain makes it easier for customers to make the best decision regarding the service that they would want to purchase. Despite the fact the service is intangible, consumers can look at the ratings and pick drivers with higher ratings. Higher ratings would mean that the customers have had an overall good experience with the driver and the service offered would most likely be the best (Moeller, 2010).
The same technique has been applied in hotels. Hotels often ask their clients to visit their website and rate them especially after major events such as conferences (Horn, 2012). Such kind of information as Lee and Soman (2008) maintain, can be very important in making a decision to consume the services provided by the hotel. Business providing services such as hotels can also make it easier for their customers by providing detailed information. Provision of detailed information makes it easier for the customers to synthesize the information and make an informed decision if the hotel or service provider would give them the best value for money (Miroudot, Lanz & Ragoussis, 2009).
The hotels could, for instance, consider allowing pre-visits by customers. Such pre-visits as Dibb and Simkin (2013) argues would enable the consumers to have a keen look at the services offered before making a final decision. Consumers can as McDaniel, Lamb and Hair (2012) advice make use of that opportunity to compare the services provided by the hotel with the services provided by other competitors and then make a final informed decision. Hotels can also help their customers by making sure that they have a well-designed brochure or even a website from which the customers can get the needed information to aid in decision making (Shoemaker & Shaw, 2008). Through brochures and websites, the customers can pick the needed information which can be helpful in decision making before even talking to the hotel owner. Providing detailed information can improve the overall efficiency of the service provider which may, in turn, translate into increased chances for business (Vom Brocke & Rosemann, 2010).
Products such as furniture can be produced at one location, sold at a different place and used at a totally different location. The same cannot be said of services. The production and consumption of services are done at the same place, time and same location (Wirtz, 2012). This as Lamb, Hair and McDaniel (2011) contend can always lead to great disappointments due to the high expectations that customers have. Customers normally have very high expectations concerning how a service will be provided. The situation is different for goods since the customers have the ample time to review and ask for adjustments before making the final decision (Moeller, 2010).
The challenge can be dealt with by ensuring that there is a solid customer’s service process. As Wilson, Zeithaml, Bitner, and Gremler (2012) asserts, the service providers must be careful to ensure customer satisfaction. Customers are the kings in any business and must be treated as such. Without customers, a business may not get the needed revenues. The service providers must always take their time to thank all the customers for the chance to give them business. Thanking the customers shows that they are valued and appreciated and is likely to make up for a bad experience at the hotel.
The service providers must also be ready to get out of their way to assist customers where necessary. Service providers must as Floyd (2006) asserts, ensure that they provide the customers with all the needed requirements and answer all their questions and concerns. Service providers must also strive to keep their integrity and promises. Hotel service providers must also measure their customer satisfaction. An unsatisfied customer is likely to talk to more people than a satisfied customer. Statistics show that 91% of customers who are unsatisfied cannot visit the same service provider for repeat purchases (Tsiotsou & Goldsmith, 2012). Measuring customer satisfaction may, therefore, be instrumental in reducing the number of dissatisfied customers. Customer satisfaction rating tools can be used to rate the level of customers satisfaction. If a business cannot determine the level of the customer satisfaction, the service providers must go out of their way to find out if the customers are satisfied. The service providers can then take such an opportunity to talk to the customers who are dissatisfied and tap into what they want and deliver it to the customers. The assurance that what they expected will be delivered in their next visit might reduce dissatisfaction and increase the rate of retention (Kaushik & Bhatnagar, 2008). To increase the chances of satisfaction, the top level management must lead from the front. Good service starts with a good reception (Nordås, 2010).
If tangible goods such as cars are not sold on one day, they can be kept in stores and sold the following day or even several months later. The same cannot be said of services. Services are perishable since the capacity of services that are unused cannot be stored for later use. A hotel may be full of people in one night and be empty or contain half the number of occupants the following day. If the number of staff on the two nights remains the same, the hotel owner will be forced to incur the same expenses. The same cannot be said on the revenues. The revenues collected when the hotel is half full will be less compared to the expected revenue at full capacity. This, therefore, results in fewer revenues and more expenses on days with less than full capacity which reduces the profit margins for the business owners (Weisman, 2012).
Despite the fact that the services will always be perishable, the hotel can learn to do better planning. The management of the hotel must learn to forecast supply and demand patterns at the hotel. If the attendance patterns show that there are more people during the day and half the number at night, the hotel may choose to operate with full staff capacity during the day and half-staff capacity at night. Similarly, if the trends reveal that weekends are busier than weekdays, the hotel management may choose to retain the full staff capacity to take care of the anticipated high number of consumers. The technique will ensure that revenues and expenses are kept in check to avoid a reduction in profit margins since the hotels will be in a position to reduce fixed staff costs (Barrows & Powers, 2008).
The hotel can also study trends to determine peak periods and low periods. In low periods, the hotel is likely to suffer a reduction in profit margins since the consumption level of the services could go low despite the fact that other fixed services including rent and staff salaries remain the same. To ensure that it remains competitive and avoid the perishability of the services, the hotel can adopt pricing strategies and promotions to increase the attendance in off-peak seasons. Giving offers and promotions may spark an increase in demand during the off-peak seasons which may keep the services in check ensuring that there is no service perishability (Jobber, & Ellis-Chadwick, 2012).
Once one makes a decision of buying a tangible good such as Sony music system. They could be assured that there can be no variability in quality even if they purchased the same from a different dealer. The process of manufactured the items is automated with an inbuilt quality system which ensures that all the units manufactured are of the same quality. The quality assurance procedures that are attached to the manufacturing process ensures that there is a consistent output in the goods manufactured. Service quality can vary depending on so many factors. The variation in service quality may stem from who provides the service, how the service is provided and when the service provision takes place. A business that relies on humans to provide services is susceptible to a lot of variabilities compared to those that rely on automation for the provision of their services. Unlike machines, humans are prone to a lot of shortcomings and errors which may impact on service quality (Bryson, & Daniels, 2007).
Services are heterogeneous in nature which makes it very difficult to set any standard for any type of service. In certain cases, the price paid per service may either too low or too high as is the case in sports and entertainment industries. Despite that, all consumers cannot buy the same type of service even if the price of the service is the same. Consumers may, therefore, end up rating the services in different ways to the different perceptions that they attach a level of service providers and the users of services (Bryson, & Daniels, 2007).
However, service providers can overcome the challenge by ensuring that there is a system of checks. For instance, hotel service providers can put in place a checklist to ensure that there is a consistent service delivery. Having a checklist ensures that all the service providers ensure that they have met all the requirements as stipulated in the checklist before providing the service. The hotel owners can also ensure that all the service providers are given adequate training. Proper training reduces the chances for error which increases the consistency of the services that are provided to the customers. Employees can undergo a professional training to ensure that they are all competent in service delivery at the hotel. The hotel owners can also consider the option of using machines in certain aspects of their service provision. Machines always ensure that there is a uniform process of service delivery. A good example of this is the replacement of bank tellers with ATM machines which reduce the variability that is associated with the different bank tellers. This can be done by providing things like automatic coffee machines which will ensure that there is consistency in the quality of services offered which shows that the service is consistent in its quality (Baldwin & Robert-Nicoud, 2014).
A business can as Baldwin and Robert-Nicoud (2014) advice, take advantage of the opportunities that stem from the variability of the services offered to create long term relationship with customers which is essential in maintaining a competitive advantage. The hotel may use that to earn the loyalty of clients which may translate into increased referrals.
In the case of goods, the goods are transferred to the name of the buyers once a purchase is made. This, therefore, makes the buyer the owner of the goods. In the case of services, the users may only access but can never own the services. In the case of a hotel that provides holiday destinations, the consumers can only use the holiday services of the service provider but cannot own the services. The inability to own a service makes it difficult for the purchasers of a service to enjoy the benefits of purchasing the service (Moeller, 2010). In this case, the marketer of the services must pay attention in stressing out the benefits of non-ownership such as inexpensive maintenance in the case of promotional programs and no long term commitment. Helping the customers to see the benefits that are attached to the services can be essential in making sure that they get the value for their money. The hotel can also assure customers of a guaranteed return of a certain percentage of their money if they do not receive the expected services. Such tactics give the consumers the courage of spending their money on the services despite the fact that they do not get to own the services (Baldwin & Robert-Nicoud, 2014).
Seasonality of services
Three societal characteristics determine the demand for services. The three characteristics include affordability, desire and the willingness to purchase. The minimum demand level of services may not enable the service providers to meet their sales objectives. In certain cases, the market responses to the offer of a service could be negative. People may be aware of the service features and the benefits associated with the service, but the evaluation of the offer provided may make them reach a decision which may not be favorable to the service provider. In certain cases, there may be no demand which could result from seasonality (Moeller, 2010). Certain services are only demanded during a given season of the year. The seasonality of the services creates a lot of problems for the service organisations. Seasonality may result in an increase in fixed costs, excess expenditure and idling capacity. The demand for services generally fluctuates. During peak tourist season the demand for services increases. There is, therefore, the need to pay attention to the nature of demand for the services for planning purposes. It is therefore important to take note of the flexibility of the important features of a service (Moeller, 2010).
The problem if seasonality is compounded with the challenge that certain hotels have a large number of units which vary in size and location. Most of the units operate at 24 hours 7 days a week. It, therefore, becomes very costly to maintain such units in off-peak seasons. Besides that, the hotels incur high fixed costs which include the costs incurred in staff salaries, rent and so on. The costs increase the costs of operations in off-peak seasons since the revenues collected reduce and the fixed costs remain constant (Jobber & Ellis-Chadwick, 2012).
Organisations that provide services can manage seasonality in a number of ways. They can do that by communicating busy days and timings. The businesses could choose to operate on busy days and close down on days when there is no demand so as to match their demand for the service capacity. This can be done by studying trends and communicating the opening days to the customers. Alternatively, the businesses can reduce the number of staff during low seasons to reduce idleness which results in increased costs due to reduced capacity. During off-peak times the number of staff could be reduced to keep the operational costs in check (Moeller, 2010).
Besides that, the businesses could offer to provide incentives for non-peak hours. Offering incentives can service providers can identify regular customers and serve them first. Serving the regular customers first service organisations could also opt to lay off certain employees. Increased number of employees results in increased costs of operations which may not be advisable during low seasons. To reduce the costs of operation, an organisation may reduce the number of staff to reduce expenses in terms of salaries (Tsiotsou & Goldsmith, 2012).
Services differ from goods in that users participate in their production. Users participate in all kinds of service production. Users take part in service production even in cases where they are not required to be near places of service production. Just as services cannot be separated from the service providers, it also becomes difficult to separate the services from the users of the services (Bryson, & Daniels, 2007). Service providers can as Baldwin & Robert-Nicoud, (2014) advice take advantage of this challenge by making sure that the consumers of service take part in service production. This can be done by getting their input before the service is provided to the customer.
There is, therefore, a great difference between goods and services. The ability of goods to be owned and moved from one place to another makes it easier for the buyer to make purchase decisions. On the other hand, services, are inseparable and cannot be owned. The service providers must, therefore, spend a lot of time in giving consumers the much-needed information. They must give the consumers enough information that would enable them to understand the benefit that they stand to get from a service. Proper plans must be put in place by management to ensure that the advantage is taken of the variability and the seasonality of services. They must come up with mechanisms for turning the negatives into positives so as to reduce costs and attract and retain more customers.
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