Uppsala universitet

2.2 A Definition of Services

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The concept of services is complicated, as a service may encompass many features, ranging
from a personal service involving a complex relationship to a service more like a commodity
with a tangible product, and thus more easily comprehensible. An example of the latter is car
rental, where the customer drives the car — a very tangible and comprehensible result of the
service offered — whereas in the case of the former, using insurance services as an example,
the customer pays for something highly impalpable, namely risk reduction. The insurance
company bears the risk, which the customer consumes all the time. Customers, however, do
not really comprehend the total context of the service until a loss is experienced. Different
levels of personal interaction are also exemplified in both cases. Car rental is often handled in a
“standardised” manner, not necessarily entailing personal contact other than signing a contract
and receiving a key, whereas an insurance contract requires a high level of personal interaction,
albeit, at times, telephonically.
Christian Grönroos, a distinguished researcher in service management, made the
following effort of compiling a definition of the phenomenon of services:
”A service is an activity or series of activities of more or less intangible nature
that normally, but not necessarily, take (sic) place in interactions between the
customer and service employees and/or physical resources or goods and/or
systems of the service provider, which are provided as solutions to customer
problems.” (Grönroos, 1990a, p. 27)
A service is individually perceived on the basis of rational assumptions by customers and
providers, and often described by abstract expressions such as trust, feeling, security, and
experience (Grönroos, 1990a). This exemplifies one of the characteristics suggested to
distinguish services from goods, namely intangibility. The others are inseparability,
heterogeneity, perishability, and ownership (Cowell, 1984). Intangibility denotes the fact that
services are often not possible to feel, taste, see, hear, or smell before they are purchased; they
are impalpable. Intangibility is closely related to the concept of comprehensibility, since a
service is not easily defined, formulated, or grasped mentally. (Donnelly et al., 1985)
Moreover, services can often not be separated from the provider, as they are, at least to some
extent, produced and consumed simultaneously and thus the customer participates in the
production of the service. Services are often characterised as heterogeneous, as it is difficult to
achieve standardisation of output; services are perishable and cannot be stored; and a customer

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always has access to or the use of a service, but not ownership of the activity or facility.
(Cowell, 1984)
These may not be the sole ruling definitions of services, but they will serve to guide the
thoughts presented in this report. At the pre-purchase stage services are also more difficult for
a consumer to evaluate compared with goods, as any evaluation of services will be low in
tangible qualities and thus difficult to compare based on previous experience, if any.
Consequently, for many customers, any evaluation of, for example, financial advice or product
recommendations, must be based on trust in the financial adviser. (McKechnie, 1992) The
service is generated by the service encounter, providing possibilities for individual evaluation,
and resulting in a contextual perception of the service, the surrogate clue (Laing, 1995). The
surrogate clue is, as suggested by its name, the substitute for a tangible product, consisting of
relationship-based factors, for instance based on experience or reputation, and more or less
tangible outcomes of a service: such as the rented car, a credit card, or an insurance contract.
Consequently, services may be tangible to some extent, or perceived as tangible in
terms of the surrogates offered for the intangible service. In order to clarify the vocabulary
used below, the term “product” used in service contexts denotes a service product unless
stated otherwise. Products in the form of goods, as opposed to services, will in undefined
contexts be called “goods.”
To illustrate the intangible character of services, Shostack’s goods-service continuum
was selected after the “services-part” (ranging from the “impure” service towards the “pure”
service with an intangible dominant) had been separated from the original examples of services
and goods. This continuum is illustrated in Figure 1
.