Q.What are services? Explain their distinct characteristics.

Services are all economic activities that are intangible and require interaction between the provider and consumer for the benefit to be realised; they are not necessarily linked to the sale of a product.

Five Is (distinct characteristics)

• Intangibility — cannot be touched, only experienced; quality is hard to judge before consumption.
• Inconsistency — no standard product; performed afresh for each customer.
• Inseparability — produced and consumed at the same time.
• Inventory (less) — perishable; cannot be stored.
• Involvement — the customer participates in the delivery.

What services are

• To an ordinary person, services are essentially intangible — buying one does not leave you owning anything physical. You can take a doctor's advice but cannot "buy" the doctor.
• Services are separately identifiable, essentially intangible activities that satisfy wants, require an interaction between the service provider and the consumer for the benefit to be realised, and are not necessarily linked to the sale of a product or of another service.

The five distinct characteristics — the five Is

Because each feature begins with the letter "I", they are popularly called the five Is of services.

• Intangibility — services cannot be touched; they are experiential. You cannot taste a doctor's treatment or touch entertainment — you can only experience it. A key consequence is that the quality of a service often cannot be judged before it is consumed (and therefore before it is bought), so providers must consciously design the service to give a favourable experience.
• Inconsistency — there is no standard tangible product, so a service has to be performed afresh each time. Different customers have different demands and expectations, so providers need the freedom to alter their offer to match each customer — as with mobile services.
• Inseparability — production and consumption usually happen at the same time, making them inseparable. A car can be made today and sold a month later, but most services must be consumed as they are produced. Technology may substitute for the person — an ATM can replace the bank clerk for cash withdrawal — but the customer's presence and interaction must still be managed.
• Inventory (less) — having little or no tangible component, services cannot be stored for future use; they are perishable. A provider can at best store some associated goods, not the service itself. For example, a railway ticket can be stored, but the journey is experienced only when the railway provides it.
• Involvement — the customer participates in the delivery of the service and can have it modified to suit specific requirements.

The two decisive differences from goods

From these features, the two main differences of services from goods are the non-transferability of ownership and the presence of both provider and consumer. Goods are produced while services are performed — a service is an act you cannot carry home; only its effect stays with you.