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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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What is a service?

Services are activities that are intangible and imply an interaction to be realized between the service provider and the customer. It is a type of economic activity that cannot be stored or touched but can only be felt. A service is consumed at point of sale. For e.g. services of doctor, experts, hotels, accounting, consultation, insurance, transport, communication etc. they cannot be touched or seen but only be felt. They have intangible attributes as compared with the goods.


Services can better be explained by the features that may be known as FIVE I's of services.

1. Intangible:

 Services are intangible that is 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 quality of offer can offer not be determined before consumption and therefore purchase. It is therefore important for the service provider that they concisely work on creating a design service.

2. Inventory :

 Services have little or no tangible components and therefore cannot be stored for future use. That is services are perishable and provider can store some associated good but not the service itself. This means that the demand and supply needs to be managed as the service has to be performed as and when the customer ask for it. They cannot be performed earlier to be consumed at a later date. For example: Railway ticket can be stored but the railway journey will be experience only when the railways provide it.

3. Inseparability:

Another important characteristic of service is the simultaneous activity of production and consumption being performed. This makes the production and consumption of services seem to be inseparable. When we can manufacture a car today and sell it after say a month this is of a not possible with services that have to be consumed as and when they are produced. ATM may replace the banking clerk for the front office activities like cash with drawl and cheque deposit but at this but at the same time presence of the customer is required and his or her or her interaction with the process has to be managed.

4. Inconsistency:

An important characteristic of service is inconsistency since there are no standard tangible products services have to be performed exclusively each time. Different customers have different demands and expectations. Service provider needs to have an opportunity to alter their offer to closely meet the requirements of the customer. This is happening, for example, in case of mobile services.

5. Involvement:

 One of the feature of service is the participation of customer in the service delivery process. A customer has the opportunity to get the services modified according to specific requirement.Both service provider and the consumer must be present at the time of service.


Services are classified into three categories that are business services, social services and personal services.

1. Business Services: Business services are those services which are used by business enterprise this for the conduct of their activities for example banking insurance transportation and warehousing and communication services.

2. Social Services: Social services are those services that are generally provided for the benefit of the society and to achieve the social goals. The social goals may be to improve the standard of living for the poor sections of society, to provide educational services to their children or to provide healthcare and hygiene conditions in slum areas. The services are usually provided voluntarily but some consideration is involved to cover their cost.

3. Personal services: Personal services other services which are experienced differently by different customers. The services cannot be consistent nature. They are different depending upon the service provider. They will also depend upon customer preference and on demands. For example: tourism, recreational services, restaurants etc.



Nature An activity or process A physical object

Type Heterogeneous Homogeneous

Intangibility Intangible Tangible

Inconsistency Different customers having different demands Different customers getting  standardized demands fulfilled

Inseparability Simultaneous production and consumption Separation of production and consumption

Inventory Cannot be kept in stock Can be kept in stock

Involvement Participation of customers at the time of service delivery. E.g., self service in a fast food joint. Involvement at the time of delivery not possible. E.g., manufacturing a vehicle.


It is not an easy task to maintain the same quality for the service again and again as there are no set procedures that can be used to deliver the service. Unlike products services are not produced by machineries, they are rather produced by the workers. Workers vary in their skills and creativity. Therefore it is not possible to maintain same quality of service but efforts are made to provide best services.


A service can be clearly & completely specified by way of associated characteristics that follow the MECE principle.

1. Service benefits to consumer:

Benefits that a consumer enjoys and which are rendered by the provider upon their request. These benefits should be described and provided in terms that are meaningful and satisfactory to consumers.

2. Functional parameters:

    Parameters refer to the scope within which a particular service is to be delivered. Therefore, parameters play a vital role to the service and describe the important framework of the service.

3. Delivery point:

It is the place/point where  the service provider provides the service and consumer enjoys the benefit of the service. At this point, service delivery can be monitored and controlled.

4.  Consumer count:

The number of consumers that are enabled to consume a service.

5. Delivery time:

   The time when the service is available and the elements of the services are available at the point of delivery. Whenever a customer demands for particular service it is available before hand without any delay.

6. Duration of Service delivery:

It refers to the maximum period of time which is allowed for the effective delivery of service to the consumer.

7. Service delivery price:

It is the amount of money/price that the service provider charge from the consumer for rendering the service.


The delivery of service includes six factors

1. Service provider (employees and managers)

2. Equipments or tools that are used to provide the service (example; vehicles, electronic system, books etc.)

3. Physical facilities (Buildings, parking and waiting rooms)

4. Consumer

5. Other customers at the  location of delivery

6. Customer contact

' Many service companies are finding their businesses under danger. This is because of the changes in technological environment of the business, consumer attitude and ability of data to create new and consumer friendly options to the services offer. Companies really put more hardships and management attention for transformation of services as they do with the products.

' Almost every company provides the same kind of service but the customer is more demanding due to the changing technology. So it's a high time for the innovation in the services by the companies to attract the consumers towards their services. Competition is one of the causes for the companies to make the services innovative in the order to have competitive edge over their competitors.

' But for the large companies, it is very difficult to change the base of their services as it is not easy to adapt the changes within a short span. It may lead to increase in cost and disturbance in the normal functioning of the companies. The companies try to revise service offerings by using digital technology and improve the consumer satisfaction.

' Some companies are lowering their cost as well but few firms are flexible enough to adapt to the changing situations. The services and the pace of change have drastically changed and mastering the traditional aspects of service delivery will no longer be enough.

' To seize the opportunities companies have to learn how to tap the potential for service innovation.

' Higher consumer expectations as consumers are becoming more demanding day by day. When consumer sees service in the different ways in one industry then they expect to find them in all others as well. Companies must look for new ideas beyond their rivals.

Rise of Internet and smart phones

Due to the increasing use of mobile phones and Internet, self-services are changing service delivery. Smart Phones open growth opportunities, reduce the cost for developing services and reduce the entry barriers.

  Advance analysis

' Company such as Amazon is known for using consumer data to personalize and tailor their services. Advancement in analytical capabilities allows companies to draw insights from massive untapped sources, leading to new service possibilities.

' Services which currently re-present about 60% of global GDP are expected to account for about 3/4 of the global growth over the coming decade. Companies that quickly evolved will better position themselves in capturing this growth while the companies who are sticking to the traditional models will face growth constraints from the digital attackers.

To meet the challenges three imperatives should be followed:

1. Institutionalizing the service innovation:

Services have a shelf life. Customers demand evolves expectations of services change and the technology advancement constantly brings new possibilities for the service companies. Therefore services should be examined and revived just like products. For this purpose R&D should concentrate to develop and refine the service offering.

 2. Personalize the customer experience:

 Company should take every step to understand customers in a better way to tailor

 Service as per their needs and wants. Earlier services were not consumer oriented.

  The spread of mobile devices assure that services can be personalized at low cost.

 3. Simplify the service delivery:

   Many companies combined new technology with process improvements to make

   Services straightforward and more pleasing. This is only possible when the

    Company simplifies their procedures and processes to deliver the services.

The new services landscape is unlocking innovation opportunities in every industry. The quest for simplicity is really simple especially as the base of innovation and customization continues to grow. Companies that Excel on these facts while considering the customer at the center of everything, will be best positioned to survive the increasing pressure from attackers and perfected the new services environment.


' Services and innovation are very broad topics. It indicates a huge and difficult challenge since this area is so far been not properly explored.

' The service sector amounts to approximately 70% of the value. Services are undertaking and are equally important in the other sectors including manufacturing and others economy is becoming more and more service oriented.

' Moreover for the employment performance of the economy as a whole services play an important role. This is evident from the number of employment opportunities that are being generated service sector.

' Services are more labour intensive than manufacturing concern. It involves skill development process, upgrading skills and matching the demand and supply. The importance of service sector is expected to grow more due to the growth from the Demand side but it is the ability of supply side to respond to it is equally important.

' Innovation is increasingly becoming decisive for competitiveness and performance in service. It is fairly to say that innovation holds the key to Service performance.

' Services have some specific features such as strong emphasis on the immediate consumption and the presence of trading and storage.

' Services can also serve as a catalyst for the development of other activities. In some instances services are of major importance in the economy. Innovation in services is featured by properties that are different from those found in other activities. The nature of services is reviving as well as innovation is taking place in services. Research and development is becoming more important in the service sector.

' Today awareness is lacking regarding innovation and services and this is often associated with misconceptions. We all agree that definition does not provide a notion that can be built for the future and also no longer traditional observations are used that says services are non tradable but non storable etc.

' It's a skill that innovation and services is beyond research and development organizational change incremental improvement & other activities that require small cost are considered as important. Due to the changing nature of services, innovation can take different shapes and different areas and changes in services sector can be observed and the linkages between various kinds of services as well as between services and manufacturing can be established. There is a need for better categorization of services and growing importance and role of intangibles.


' Measurement issues have risen up time and time again. Services and innovation in services, the performance of services and link between innovation and performance are very complex to measure. It is shocking to find out how much do not know about the service sector.

' We do not have comparable measurement of even basic things. For solution to the situation there is a great need for a wide awareness of what is lacking for updated information on services and on innovation in services. There may not be any immediate positive effects for the product itself but innovation enable critical improvement in the performance of inter firm relationship for a period of time.

' Improvement in the understanding for innovation in services is very much a question of gaining a better handle on the driving forces as well as the barriers and how these are changing over a period of time. Upgrading Skills and human capital are milestones for successful renewal and upgrading of service activities.

' One of the most long-term barriers to innovation in services is the educational systems with aim at and is measured by quantitative result rather than quality and which fails to encourage businessmen and creativity. The expansion of information and communication technology and the evolution of Internet are creating huge opportunities for assessing information.

' Rapid progress in technologies, globalization of goods and markets an extensive liberalization is opening up many new opportunities for service activities. At the same time these factors are bringing increased competition and more pressure of adjustment. These changes will become widespread and reshape the service sector in many countries that have not yet experienced this area.

' Non-adaptability to the changes with the lack of information regarding new opportunities and the way to tap them are major barrier for innovation in services. The process of change is dynamic that speed up the innovation and the diffusion of technology and more focus on the information access and use for incremental innovation.

' So we have the essential driving forces of innovation but at the same time barriers to the flow of information, to creativity, to competition and upgrading skills and to mobility stem innovation in services. These barriers are multifaceted.

' Service sector innovation derives less from investment in formal R&D and draws more extensively on acquisition of knowledge from outside sources.

Human resource development is crucial to service firms, given their high reliance on highly skilled and educated workers.

Awareness about the importance of innovation in service is an engine for the economic growth. Earlier services were considered as non innovative activities or innovation in services was reduced to the use of technologies. Innovation in services was addressed from a manufacturing concern. This biasness towards manufacturing is the under estimation of innovation in services and its effects because innovation in services includes invisible or hidden innovation that are not captured by the traditional indicators of innovation in the manufacturing units.

Conceptual perspectives for innovation in services

1. Assimilation

It is the technological innovations in manufacturing sector. It has reduced innovation in services to the adoption and use of technology it considered technological or product and process innovation. It attempts to assimilate services within the framework used for manufacturing units and manufactured products.

2. Demarcation

It is non technological innovation. It leads to new ways for innovation in services, non technological types of innovation such as organizational innovation and ad hoc innovation and marketing innovation. It attempts to develop a specific framework for service innovation while attempting to highlight all the specificities in service and production process.

3. Integration

It is a complex and architecture form of innovation. It shows convergence between manufactured goods and services in regard of innovation. It includes both technological and non technological innovation. It attempts to develop a common concept which able to account for a broad view of innovation that is applicable to any tangible or intangible product. It proposes a new concept of innovation in services based on a new definition of product.

Defining the whole range of innovation in services is not an easy task. It is beyond the different approaches. Innovation is a major source of economic performance but the relation between economic variables and services innovation like productivity is to be clarified. In fact in the service sector, the innovation gap is considered with a performance gap. The innovation gap indicates that our economy consist of invisible innovations which cannot be identified by the traditional methods while the performance Gap reflect the under estimation of efforts towards the improvement in the performance.

Effect of service innovation on employment

Effect of innovation unemployment is doubtful. On one side it increases the employment for the skilled person but on the other side it reduces the man power due to the use of technology.

Lack of innovation policy for the services

Earlier no policies were framed for the innovation in the service sector which were being given to consumers as main focus was on the manufacturing sector. Therefore the service sector remains ignored from the innovation policy. But due to the increasing demands of customers and need of innovation in the services lead to innovation policy of the services by the different companies.

Innovation in services rarely depends R&D

Firms do not focus on putting new technology in the hands of consumer; rather they seek to find the solutions of customer needs and problems by using the new technology.

Availability of skilled workers is important for innovation in services

Only the skilled labour has the knowledge and the capacity to understand the new latest technology. Because skilled workers play a vital role in the innovation of the services as they have the ability to use the new technology in the innovative way to make the services better from its competitors and attract the consumers. Shift from the production sector to the service sector also required changes in the human resource and the education policies as forms may require skills that are currently used in supplying the services in an innovative way. Having a good supply of qualified and efficient workers is most important for the service sector but along with the qualified person education policy should be accompanied so as to assist to the workers in the service delivery. Innovation in the services can also be done by involving the skilled and educated workers in the process of designing and identifying the services.


' Due to the Globalization of services consumers may benefit from the lower prices directly on the enhance efficiency indirectly sourcing the service business from the lower which countries can reduce the price of service, finance, transport and health. There are number of factors that led to the growth in the service sector and one of the important factors is the growth in competitive pressure reforms like in transportation, communication, finance etc. have open up service markets.

' Growth of competition in service sector is important as it fosters the growth and entry of new forms in the market which are innovative and helps in meeting the consumer demands. Important services like health, education and social services are provided in a non-market and formant the absence of price mechanism indicates that it is difficult for the non-profit providers of the services to meet the demand which is sometimes maybe due to the absence of competition between the providers and the funding. International trade helps the countries in strengthening their business services.

' Strong competition along with the international trade can reduce the cost and prices, increase the innovation and efficiency and widen up the range of services offered. Moreover reduction in the trade barriers for the services can also help the firms in their production process. Development in service sector can also be hampered by the high indirect taxes. These taxes work as the obstruction between the private and social returns the personal service sector is likely to be most affected by these high rates.

' There is a great need for addressing the tax barriers to cross-border services and intangibles. The cross-border services will help in increasing the revenue of the forms and also helps in generating the foreign exchange for the country thereby helping the country as well as the firms in expansion of their operations.


1.  For economic growth: Innovation paves the way for the economic growth as industries are maturing, products are maturing. Innovation is the creation and transformation of new knowledge into new product process for services that meet market needs.

2.  For the human well being: Innovative services are helpful in increasing the living standard of the people as innovation create new services within the reach of the people therefore they have the easy access to the services which increase their living standard.

3. Competitive advantage: Innovation is the only thing in the services that differentiate the service of one company from the service of another company as services are given to the humans. They judge the services on the basis of innovation they have been given by the different companies. Therefore for having competitive edge over the competitors innovation is must.

4. No more Cost cutting: Due to the vast changes in the technological environment of the country it becomes necessary to use the technology in designing the services. By using the technologies firms are in a position to provide the services at some higher prices because in order to earn higher profits higher cost to be incurred therefore cost cutting is not enough anymore for the organization to grow and develop.

5. Desire for high revenues: It is well said that in order to on the higher revenues high risk are to be taken and for the innovation in services the risk involved is huge as innovative services designed are prone to risk their for innovation is necessary for earning the revenues as higher prices are charged for the innovative services. In today's world it is not a service which is sold it is innovation which earns a great price.

6. For performance improvement: Innovation is important for improving the performance of a service If the service is not satisfying to the consumer and innovation is being developed in that service for improving its quality and the satisfaction level for the consumers. It helps in improving the disappointing performance of the. It means it helps in reviving of service.

7. Grabbing the opportunity: When the customer feels that the service provided by the different companies are monotonous than they do not make the choice from which company they want the service. So it becomes important for the company to tap the opportunity by enhancing the services through innovative ideas. Therefore whenever a new technology is introduced companies find the way how to use it innovatively in their services for distinguishing their service from its competitors.

8.  For constant flow of innovation: Once the innovation is introduced in the services it is important to maintain the constant flow of innovation in all the services being delivered by that company. If innovation once introduced is not continued then the quality of the service falls and the companies may suffer the losses as the customers may move on to the other service providers.

9.  For the survival: Technological changes are taking place rapidly in the economy if the company does not adapt to these changes then the survival of the company becomes difficult. Therefore in order to survive in the changing and dynamic environment it is important to adapt to the new technology and using the technology in designing the innovative services.


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