How services add value

 

What is a service?

A common definition for a service in marketing terms is:

A service is any performance, experience or act (that one party can offer to another and that is essentially intangible and does not result in the ownership of anything.

A good way to remember the scope of the services to use the acronym of PEA, where P = performance, E = experience, A = act.

How services add value

Services are processes (economic activities) that provide:

  • time,
  • place,
  • form,
  • problem solving or
  • experiential value (or utility) to the consumer.

Let’s explore each of these value adding elements.

Time utility or time value

Services provide time value are essentially transport and convenience-based. Some examples of service firms that provide time value to end-consumers are: airlines, taxis, bus transport and trains, home cleaning services and laundry services.

Transport services are able to physically move people or objects reasonable distances quite quickly. This provides a time benefit to a consumer as they complete their journey faster and have more time as a result.

A simple way of thinking about this is deciding whether you walk 3 miles to university or you catch a taxi instead. If you are running late for a university class for example, then you would be seeking the benefit of time by using a taxi service.

The two other examples of providing time utility listed above are home cleaning services and laundry services. This gives consumers the benefit of extra time because they are not spending time cleaning and washing clothes themselves.

For example, a busy professional couple may work long hours and prefer not to have to clean their apartment on the weekends. In this case, by using a cleaning service, they free up their weekends for their own activities and to relax.

Place utility or place value

The next type of value/utility that can be generated from a service is in the form of place. This is examples here would include logistics firms, retailers, and online services.

For a retailer, for example, such as a supermarket – they tend to locate the store conveniently close to large communities and populations. They also aggregate lots of product and merchandise into the one location.

This provides tremendous value to consumers as they can visit a nearby store and quickly purchase many of the products that they need.

The same type of value is provided by website and online services. By making products and/or information easily available via a website, consumers can quickly locate and find what they are looking for.

Form utility or form value

The easiest way to think about the benefit for consumers of “form” is that they are being “transformed” in some manner. Examples here would include universities and colleges, as well as gyms and fitness centers.

In terms of the service value provided by universities and colleges, they are changing their customers (that is, their students) minds and providing them with knowledge, thinking skills and analytical ability. It would be expected that the capabilities of a student will be greatly enhanced during their time in a university degree.

Gyms and fitness centers provide form utility as well – but in this case it is not a mental form, that is a physical form benefit. Consumers will attend a fitness center in order to get better, lose weight, or generally improve their health.

Problem solving utility or value

Another way that services and can add value and benefits to consumers is through problem solving. Examples of problem solving utility from a service include; legal and accounting services, consulting, counseling, repairs and tradespeople.

These types of services provide in information and advice (such in the case of legal services) or physical assistance (such in the case of a plumber or electrician).

Consumers will utilize the services primarily because they do not have the skill or expertise to solve their particular problem – which may be legal-based or electricity-based as per the examples above.

Experiential utility or value

The final way that services add value is through experiential utility. Many entertainment services would fall into this category – such as movies and concerts. Obviously, theme parks and special events and theater productions would also contribute experiential value.

These types of services are designed by consumers as the consumers will seek an experience or a memory for a special occasion.