Service Consumption Introduction

    The term consumption is often equated in the economic literature with consumer and corporate expenditures. In reality, the word means “the act or process of using something up.”

    It’s easy to understand how packaged goods are consumed. A soft drink is drunk, cornflakes are eaten, detergent is poured into the washing machine, and heating fuel is burned.

    By contrast, durables, such as appliances, garden furniture, computers, or cars, are designed to last a number of years.

    Their useful life can be extended through maintenance, repair, and even upgrades, but eventually, they break, wear out, rust, rot, or become obsolete.

    This notion of physical consumption or deterioration doesn’t apply to most services. Exceptions exist as regards food and beverage services, but they are a special case.

    Certainly, the factors of production necessary to create services eventually need replacement.

    Employees leave or retire; fuel is consumed to heat, cool, or light service facilities or to operate service vehicles; furnishings suffer from wear and tear; machines break down or become obsolete, and buildings may eventually have to be reconstructed or even demolished.

    A key task for operations management is to ensure that all of these elements remain in good working order – through maintenance, repair, or replacement – so that the quality of the service performance is not compromised.

    Gronroos captures the distinction between goods consumption and service consumption by describing the former as output consumption and the latter as process consumption.

    In service marketing, customers didn’t normally obtain ownership of services. They merely acquire the right to a performance that makes use of the service firm’s assets.

    Perhaps the single most important element that is consumed in service delivery is time, which is an irreplaceable resource for both customers and providers.

    In many instances, service organizations rent out the use of their physical or intangible assets – buildings, vehicles, machines, instruments, rooms, seats, beds, and telecommunication bandwidth.

    Banks rent money to customers in the form of loans. Firms also let customers rent the labor and expertise of their employees. But there’s an opportunity cost involved; the asset becomes unavailable for alternative uses.

    Similarly, customers who spend time using a service cannot devote that time to another purpose.

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