The document outlines various classification schemes for services based on factors such as customer contact, degree of customization, and service delivery methods. It emphasizes the importance of understanding the nature of service acts and the relationships between service organizations and customers for effective service strategy formulation. By utilizing these classifications, organizations can gain insights to enhance service delivery and achieve a competitive advantage.

1. CHAPTER - 2
CLASSIFICATION
OF
SERVICES
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2. KEY POINTS
• Introduction
• Definitions of Service Classification
• Different Classification Schemes
Nature of Service Act
Type of Relationship that the Service
Organization has with its Customers
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3. Scope for customization and
judgment on the part of the service
provider
Nature of Demand and Supply for
the service
Method of Service Delivery
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4. INTRODUCTION
• A thorough understanding of the
competitive, dimensions and
limitations of the industry is necessary
for a firm to formulate its service
strategy. Establishing a classification
system can help understand services
more clearly & can provide insight into
how marketing principles effectively
applied.
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5. DEFINITIONS OF SERVICE
CLASSIFICATIONS
• Equipment/People focus
Equipment focused services are
those where the provision of certain
equipment is the core element in
service delivery.
People focused services are those
where the provision of contact staff
is the core element in service
delivery.
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6. • Customer contact time per transaction
High distance contact is where the
customer spends hours, days or
weeks in the service system per
transaction.
Low customer contact is where the
contact with the service system is for
a few minutes.
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7. • Degree of customization
A high-degree of customization is
where the service process can be
adapted to suit the needs of
individual customers.
A low-degree of customization is
where there is a non-varying
standardized process; the customers
may be offered several routes, but
the availability of routes is
predetermined
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8. • Degree of discretion
A high degree of discretion is where
front office personnel can exercise
judgment in altering the service package
or process without referring to
superiors.
A low degree of discretion is where
changes in service provision can be
made only with authorization from
superiors. 8

9. • Value added back-office/front-office
A back-office oriented service is
where the proportion of front office
(customer contact) staff to total staff
is small.
A front-office oriented service is
where the proportion of front office
staff to total staff is large.
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10. • Product/Process focus
A product oriented service is where
the emphasis is on what the
customer buys.
A process-oriented service is where
the emphasis is on how the service is
delivered to the customer.
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11. The Nature of Service Act
• The tangible nature & who/what is the
direct recipient of the service creates four
classification possibilities they are: Tangible
actions directed to the - customer,
customer’s possessions & Intangible actions
-directed at the customer’s intellect,
performed on customer’s assets. The nature
of service may identify more convenient
forms of service delivery or a product that
can substitute for the service e.g. videotapes
of lectures.
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12. Understanding the Nature of the Service Act
(FIG. 2.1)
Direct Recipient of the service
People Things
Nature of the Services directed at Services directed at
Service act
people’s bodies goods and other
Health care Physical possessions:
Passenger transportation Freight transportation
Tangible Beauty saloons Laundry & dry cleaning
actions
Restaurants Landscaping / lawn care
Services directed at Services directed at
people’s mind intangible assets:
Education Banking
Broadcasting Legal Services
Intangible
Information services Accounting
actions
Theatres Securities
Museums Insurance
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(Christopher H Lovelock. “Classifying Services to Gain Strategic Marketing insights”)

13. Type of Relationship that the Service
Organization has with its Customers
• This classification scheme describes
the advantages of formal relationship
with customers. Having customers as
‘members’ brings this advantage of
building customer loyalty, when in
informal relationship there is nothing
known about the customer.
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14. Relationship with Customers (FIG. 2.2)
Nature of Membership relationship No formal relationship
Service
Delivery Insurance Radio station
Telephone Police protection
Continuous subscription Light house
delivery College enrollment
of service Public highway
Banking
Long distance calls Car rental, Pay phone
Theatre series Mail service, Toll way
Discrete
transaction
subscript Theatre,Restaurant
Computer ticket – Public transportation
pass
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15. Scope for Customization and Judgment
in Service Delivery
• Services are created as they are consumed
so there is far more scope for tailoring the
service to meet the needs of individual
customers. Some service concepts are
quiet standardized while some offer a
wide choice of options, and some gives
the customer contact personal wide liberty
in how they deliver the service.
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16. Customization and Judgement in Service Delivery
(FIG. 2.3)
Extent to Which Service Characteristics are
Extent to Customized
which
customer
High Low
Contact Professional Services Education (large classes)
Personnel
Exercises Surgery, Plumber Preventive health prog..
Judgement High Beautician, Taxi services College food service
in Meeting
Education (tutorials)
Individual
Customer Gourmet restaurant
Needs
Telephone service Public transportation
Hotel service Routine appliance repair
Low Retail banking Movie theatre
Family restaurant Spectator sports
Fast-food restaurant 16

17. Nature of Demand & Supply for the
Service
• The perishabililty of service capacity
creates a challenge for service
managers because they lack the option
available to manufacturers of
producing and storing inventory for
future sale. But the extent of demand
and supply imbalances varies across
service industries.
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18. What is the Nature of Demand for the Service
Relative to Supply (FIG. 2.4)
Extent of Demand Fluctuation over time
Extent to which Wide Narrow
supply is constrained Electricity,Natural gas Insurance
Telephone Legal services
Peak demand can Hospital maternity unit Banking
usually be met
Fire emergency Laundry and dry clean
without a major
delay Accounting and tax
preparation Service similar to
those above
Peak demand Passenger transport But with insufficient
regularly exceeds Hotels and motels Capacity for their base
capacity Restaurants & theatre level of business
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19. Method of Service Delivery
• MOD raises a number of interesting
and important issues for the service
provider. It can cut across service
industry barriers, thus enabling
comparisons to be made with and
lessons to be learned from service
companies in other business fields.
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20. Method of Service Delivery (FIG. 2.5)
Nature of interaction Availability of Service Outlets
bet. Customer and Single Site Multiple Sites
Service Organization
Theater, Bus service,
Customer goes to
service organization Barbershop Fast-food chain
Lawn care Mail delivery,
Service organization
services, Emergency
comes to customer
Taxi repairs
Customer &Service Credit card Broadcast
organization transact company, network,
at arm’s length (mail Local TV Telephone
or electronic
station company
communication)
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21. Summary
• Thus, We may infer that these
classification schemes gives deep
insight in the strategies that can be
implied in order to make business
more appropriate which may provide
the competitive edge.
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