1. Classifying Services to Gain Strategic Marketing Insights
Christopher H. Lovelock
(Paper No. 1)

2. Background of Our Economy
Agricultural
Industrial
Service
As the service industry continues to grow it is necessary to “segment services into clusters”1 to gain marketing advantages.
Our industrial/manufacturing background has hinder the evolution of the service industry because most managers come from manufacturing or are heavily influenced by the manufacturing industry and its practices.
A better classification will allow marketing to find better practices to satisfy customers and make the service industry a more mature one.

3. Previous Analysis 1923 – Copeland2 1963 – Bucklin3 1976 – Hunt4
Convenience
Shopping
Specialty goods
Durable goods
Non-durable goods
Consumers goods
Industrial goods

4. Classifications What is the nature of the service act?
What type of relationship does the service organization have with its customers?
How much is there for customization and judgment on the part of the service provider?
What is the nature of demand and supply for the service?
How is the service delivered?

5. Understanding the Nature of the Service Act?
What is the Nature of the Service Act?
Who or What is the Direct Recipient of the Service?
People Things
Tangible
Actions
Services Directed at People’s Bodies:
Health care
Passenger transportation
Beauty salons and Haircutting
Services directed at goods and other physical possessions:
Freight transportation
Janitorial services
Laundry and cleaning
Intangible
Services directed at people’s minds:
Education
Broadcasting
Theaters and Museums
Services directed at intangible assets:
Banking
Legal services
Securities and Insurance
Does the customer needs to be physically present?
Does the customer need to be mentally present during the delivery of the service?

6. Customization and Judgment in Service Delivery
Extent to which Customer Contact Personnel Exercise Judgment in Meeting Individual Customer Needs
Extent to Which Service Characteristics Are Customized
High Low
High
Legal service
Health care / surgery
Plumber
Tutorial service
Public education
Preventive health programs
Low
Telephone service
Hotel services
Retail banking
Public transportation
Fast food restaurant
Movie theater
Some services come standardized, others with some sort of customization, and others are fully customized.

7. Nature of Service Delivery
What Type of Relationship Does the Service Organization has with its Customers?
Nature of Service Delivery
Type of Relationship between the Service Organization and its Customers?
“Membership” Relationship No Formal Relationship
Continuous Delivery of Service
Insurance
Telephone subscription
College enrollment
Banking
AAA
Radio station
Police protection
Lighthouse
Public highway
Discrete Transactions
Long distance phone call
Theatre sales subscription
Commuter ticket or transit pass
Car rental
Mail service
Toll highway
Pay phone
Public transportation
Does the service organization enter into a ”membership” with its customers or is there a no formal relationship?

8. What is the Nature of Demand for the Service Relative to Supply
Extent to which Supply is Constrained
Extent of Demand Fluctuation over time
Wide Narrow
Peek Demand Can Usually Be Met w/o a Major Delay 1
Electricity
Natural gas
Police and fire services 2
Insurance
Legal services
Banking
Peek Demand Regularly Exceeds Capacity 4
Accounting and tax preparation
Passenger transportation
Restaurants 3
Similar services to 2 but which have insufficient capacity for their base level of business
What is the common cycle or recurring demand of the service?
What are the fundamental causes that create the demand fluctuations of the service?

9. How is the Service Delivered?
Nature of interaction between Customer and Service Organization
Availability of Service Outlets
Single Site Multiple Site
Customer Goes to Service Organization
Theater
Barber Shop
Bus Service
Fast food chain
Peek Demand Can Usually Be Met w/o a Major Delay
Lawn care service
Pest control service
Taxi
Mail delivery
AAA emergency repairs
Peek Demand Regularly Exceeds Capacity
Credit card company
Local TV station
Broadcast network
Telephone company
What method is used to deliver the service?

10. Conclusion
To help managers of service business to do a better job of developing and marketing their products.
Help managers understand the nature of their service businesses.
The faster we get to master the service industry, the faster we can move on to the next type of industry: experience.

11. References
Knisely 1979, Lovelock 1981, Shostack , Journal of Marketing, summer.
Copeland, Melvin T. (1923), “The Relation of Consumers’ Buying Habits to Marketing Methods,” Harvard Business Review, 1 (April),
Bucklin, Louis (19630, “Retail Strategy and the Classification of Consumer Goods,” Journal of Marketing, 27 (January), 50.
Hunt, Shelby D. (1976) Marketing Theory