Question

1. Identify the key features of:

a) Professional service firms

b) Service shops

c) Mass service entities

Answer 1

a)

1. People-based

Suffice to say, if it were not already obvious to you, that professional services businesses are fundamentally about people. They need to be managed to attract, develop and retain the best staff, and associates, you can find in the market. Growing a professional service business also involves an understanding of the concept of a ‘leverage structure’ (ratio of junior to senior staff) and how this directly relates to your firm’s profitability.

2. Management Quality

Closely linked to the first point, the aspect of management quality is magnified in the professional services business. Professionals – by their nature educated, intelligent self-starters – will not hang around for long if the leaders are sub-standard. Similarly, this aspect will be scrutinised by any potential acquirer. It is not just, however, about the qualities of the people in the top roles. In future extracts you will learn how your embedded practices, organisation and toolsets all impact on your firm’s management quality.

3. The Marketing Challenge

Whilst a professional service might, at one level, seem an easy proposition to message to those who have the requisite need (e.g. ‘We build websites’, ‘we can audit your annual accounts’, ‘we design buildings’ etc), at another, competitive level you will have a significant challenge. How do you organise your service offerings? How do you differentiate from your competitors? How do you communicate the benefits of your service approach and style or the type of people you employ? This is a very different challenge to that faced by a product based marketer. ‘Cracking the marketing nut’ will be key to growing value in your firm – as you will get to learn later on.

4. The Selling Challenge

Similarly, selling professional services is very different to retail selling or productised business-to-business (B2B) as, for example, with software licensing. A key feature of this difference is a fundamental one that – in the main – those that provide the service are best placed/able to sell it. Unlike in other businesses that employ generic salespeople (and then give them training in the product), in a professional service business, the challenge is rather to train your doers (consultants, engineers, designers etc) to be able to sell also. Indeed, the most critical, value-determining challenge you are likely to face is that of turning this capability from an esoteric skill undertaken by a select few to a systematic, shared one. Only then will your business truly have value. I examine this aspect in some detail in Guide 08.

5. Pricing

The pricing of professional services is also a science (and art) of its own. Similar to any business, multiple factors will influence the pricing strategy – market need, competition, service model, the brand premium you command etc. What is unique is that there tends to be a lot more flexibility available to the professional services firm in this regard; each tender competition essentially presents an opportunity to renew your pricing strategy/model/rate. You will have the choice of fixed price, outcome-based risk-reward or the conventional time and materials model. How much do you discount to win a new client or to keep utilisation levels high? Unlike unsold stock, an un-billed hour can never be recovered. There are a number of unique dynamics at play here that we will need to explore later.

b)

1) Intangibility

When you buy a car, you can see it, feel it, and even test it prior to purchase. In other words, products have tangible qualities that provide information to consumers so they can easily compare one product to another. Services, on the other hand, are intangible. Most services cannot be experienced or consumed until the purchase is made. Customers can easily end up feeling like they have to make a purchasing decision without adequate information.

What is the answer to this challenge? Communicate, communicate, communicate. Communication can come from a variety of sources. The use of customer testimonials and referrals is an excellent way to reduce the level of intangibility for your service. Additionally, you can increase customers’ comfort level by explaining your service in as much detail as possible. If you provide your services at one location (e.g. a doggy daycare) you might consider allowing customer preview visits. Here is a tip: a well-designed brochure or website can provide information to customers before they talk to you, improving your overall efficiency and increasing your chances of securing new business.

2) Inseparability

To continue using the automobile analogy, cars are produced at one location, sold at another, and used at yet another location. Services are unique because they are usually provided and consumed at the same time in the same location (e.g. a haircut or car tune-up). Because of the characteristic of inseparability, customers have strong expectations about how a service will be provided, which can lead to disappointment if their expectations are not met.

A solid customer service process is the key to managing this challenge effectively. How do you ensure customer satisfaction? How do you deal with unhappy customers? If you don’t know the level of your customers’ satisfaction with your service, ask them!

3) Perishability

If a car does not sell today, it can be stored and sold the following day or at some other time in the future. Services, on the other hand, are often perishable, meaning that unused capacity cannot be stored for future use or sale. For example, a restaurant might be full one night and half empty the next. If the restaurant runs with an inflexible staffing model, expenses are the same each night. However, the revenue picture is quite different, which impacts profits. The same is true for Mt. Bachelor – every empty seat on the chairlift is lost revenue.

This challenge can be overcome by carefully managing supply and demand. A restaurant might operate with fewer staff during the week and hire additional staff to cover weekends when demand is higher. This strategy will allow the restaurant to provide the same level of customer service with varying customer demand—and improve productivity. Does your business have peak periods? What can you do to control supply and demand? Tip: Use pricing strategies and promotions to stimulate demand for your service.

4) Variability

Once you have decided to buy a Honda Accord, you know that there will be no variation in the quality of the Accord from one Honda dealer to another. Manufactured goods tend to have automated processes and quality assurance procedures that result in a consistent product. However, the quality of a service can vary by many factors, including who provides it, where it is provided, when it is provided, and how it is provided. The more your business relies on humans to provide services (instead of automation), the more susceptible you are to variability.

How can you manage this challenge? Establishing standard procedures (or checklists) can ensure consistent service delivery. If you have employees, training is essential. Can technology improve an aspect of your business? One obvious example of technology’s impact is illustrated by ATMs reducing bank teller service variability for customers. Don’t forget the “little things” like invoicing and newsletters. Any time you have a “customer touch” you have an opportunity to demonstrate consistency and professionalism, which will translate into your customer’s perception that your service is consistent in quality.

c)

1)Purpose

– The purpose of this paper is to provide services marketers with a deeper understanding of the elements that characterize mass services. The paper shows that many studies have been conducted within the context of professional and retail services, knowledge of mass service contexts is limited despite the growth of services within this context.

2)Design/methodology/approach

– This paper provides a conceptual overview of mass services and develops a typology for mass services based on an extensive review of the services literature. Specifically, the typology developed classifies mass services on the basis of service delivery and purpose. The typology forwarded, therefore, classifies mass services using a two‐by‐two framework with individual and collective mass services classified as either utilitarian or hedonic in nature.

3)Findings

– The typology found in this paper provides a practical insight into the characteristics of services falling into the classification of mass services. The value of the classification is that managers can better understand the unique aspects of mass services, thus, allowing for a better utilization of limited resources. Moreover, the paper provides insights into a service classification that has received limited research emphasis, yet, is attracting increasing industry attention.

4)Originality/value

– This paper provides academics and practitioners with a framework that has both tactical and strategic implications. These implications include enhancing the customer experience and thus customer retention, resource management, employee training and service management. Given that such a framework has not been forwarded in the literature, the typology presented in the current paper makes an original contribution to the literature.