Tyman-Space Online College - free online courses
  | SYLLABUS | TSOC Home | About | Fair Use | Privacy | Contact | SEARCH
  | SyKronix Marketing Portal | Marketing Forum | Sykronix White Papers
SERVICES MARKETING AND MANAGEMENT

GOODS
associated with an outcome which results in the ownership of a physical thing

  • Durable goods
    physical products used over an extended period of time
    - e.g., an automobile

  • Non-durable goods
    physical products that are more quickly consumed or worn out
    - e.g., gasoline


SERVICE
an action that one party can offer to another which provides an outcome with intangible benefits but does not result in the ownership or possession of a physical thing as the core benefit

CUSTOMER SERVICE
an activity that adds value to a product

Think of goods and services as a continuum.


KEY CHARACTERISTICS WHICH DISTINGUISH SERVICES FROM GOODS:

intangibility
less tangible than tangible; can't see, taste, touch, smell, or hear prior to purchase

inseparability
simultaneous production and consumption; instantly consumed; service cannot be separated from provider

heterogeneity (variability)
less standardized and uniform than tangibles; variability in end result

perishability
cannot be stored for future use; what isn't used is gone forever

NOTE: services tend to hold these characteristics, but are not necessarily so.  E.g., a shoe repair service does not exhibit the characteristics of inseparability or perishability.  Additionally, a repair to your shoe is only partially intangible - a new sole is certainly tangible and a major physical component of the shoe.

If you think of goods and services as lying on a continuum, then it is easier to see that most products contain some elements of both, with very few products being "pure" goods or "pure" services.  The reason that marketing scholars have begun to think conceptually about services with the above factors - and not just the issue of intangibility - is that the production, distribution, and pricing of services often presents important differences from these elements as associated with goods.


INTANGIBILITY

If you take a traditional college course, you pay hundreds of dollars to sit through 45 hours of lectures, discussions, and exams.  What physical thing do you have at the end to show for it all?  Well, you have your notes, but you produced those, and the paper and pencil used to produce them were not included in your tuition.  At the end of the course, the only physical thing that ends up in your ownership is a grade report, printed in a piece of paper worth less than a penny.  This piece of paper merely serves as tangible evidence of your service experience.

A problem for the marketing of services, then, is that it is often difficult for prospective customers to understand the benefits of owning the product.  Life insurance, for example, is an "unsought product" because prospective buyers often cannot "see" the need for its attributes.  Many salespeople fail in their attempts to sell such intangibles because they do not have the skills necessary to help a prospective buyer understand her/his needs and to understand how the product has benefits which meet those needs.  Indeed, many people allow an insurance policy to lapse after purchase because, for hundreds of dollars in premiums, they merely see the tangible evidence in the form of a paper policy.


INSEPARABILITY OF PRODUCTION AND CONSUMPTION

There are two issues here.  First, services are often simultaneously produced and consumed: production and consumption cannot be separated.  A music concert must be produced and consumed at the same time to enjoy the full experience - a recording of the event is not the same as the "live" performance.

A second issue that is sometimes associated with inseparability is that the service often cannot be separated from a specific provider.  If the original artist was sick and another was substituted for the music concert, many ticket holders might demand a refund.  Produced by a different person, it is not the same experience and is therefore not the same product.


HETEROGENEITY IN PRODUCTION

Since most services are produced by people, rather than by machines, there is a greater possibility for greater variability in the final product than in the production of a tangible thing.  Two different musicians do not play a song exactly the same, and even the same musician might not play a song exactly the same way in two different concerts.  In some ways, this is something that is good - we would like every concert to be a different experience and every visit to an expensive restaurant to be a unique experience.

On the other hand, what if two different professors teach the same course differently, and you get a lower grade than a friend who had the other professor?  Even the same professor can experience difficulty in holding two different sections of the same course at the exact same pace!  In this case, variability in production is not a desirable product attribute and presents problems in management that are more easily solved in the production of tangible goods.  If we produce a few bad widgets, we can just throw them in the scrap pile, and then warehouse and sell only those widgets which meet quality specifications.  If we produce a bad airline flight, it was instantly consumed and cannot be discarded.


PERISHABILITY

If you have tickets for a concert, and miss the concert, it is gone forever.  Although it can be stored on a recording, that recording is not the same as the live experience.  A bus costs about the same to drive whether it is one-quarter full or three-quarters full.  An assembly line can store widgets that are not purchased immediately after production; the movement of fifty bus seats from one city to another must be instantly consumed and cannot be stored for future use.

Note that classifications such as perishability suggest only a tendency.  The ministrations of a shoe repair person can be stored; the work can be done at one time and the shoes stored on the shelf until you return at a later date.  The service produced by a bank teller cannot be stored - if there are no customers, we must still pay the teller the same wages to stand idle.  On the other hand, an Automatic Teller Machine can store the same service for future transactions to be delivered when the customer demands.

Break even analysis and issues of fixed and variable costs can work much differently in the production of services in contrast with the production of tangible things.


MANAGING SERVICE CAPACITY

peak demand
the point in time when consumers want to use a service

off peak demand
the time when consumers do not want to use the service

RECALL: services tend to be perishable.  An empty airplane seat, once flown, is an expenditure that produces something that cannot be warehoused for future sale.  How can an airline manage problems of over- and under-capacity?  Why are one-way fares higher than round trip?  Why are the prices lower if you wait until Sunday to return rather than return on Friday?

shifting demand for services
Consider a nail salon, which must pay the nail technicians whether or not customers are in the shop.  In the production of goods, labor is usually considered to be a variable cost, but in the production of services, labor is usually considered to be a fixed cost, which, along with the electricity and the rent, must be paid whether or not anything is produced.  How can the salon manager induce some of the customers to come to the shop during slow times rather than at the busiest times? 

Just as the airlines discount the price of airfare to induce people to travel during off peak times, the nail salon could use a similar strategy.  Coupons in the local newspaper could advertise a "Wednesday special" with a ten percent discount during slower periods in the mid week.  If clients are in a rush at the end of May to get their nails ready for the summer, offer an "early bird special" at the beginning of May to induce some of those customers to arrive early.  If business is slower in mid winter, advertise a "mid winter tune-up" to remind customers or potential customers of the service.

Regular clients could be offered on-the-spot discounts as well.  Consider a client's reaction at the cash register: "Sally, I appreciate your business and we're giving you a ten percent discount for arriving early today."  The tip might more than make up for the discount, Sally will walk out of the shop with a positive feeling, and Sally is likely to tell others about the unadvertised incentive for using the service at off-peak times.  And that word-of-mouth advertising will cost the salon manager nothing once Sally starts talking!  (NOTE: Be sure to be consistent in applying any unadvertised incentives.)


CUSTOMER CONTACT
interaction between provider and customer needed to deliver the service

internal marketing
training and motivating customer-contact employees to work as a team to provide customer satisfaction

we often have to explain to employees within the organization how and why it is that they perform important boundary spanning functions

boundary spanning
a boundary spanning employee is the point of contact between an organization and its customers

Consider a visit to a bank in which the teller is not only rude, but makes a mistake.  After a brief argument, you are able to convince the teller that a mistake has been made, but you receive no apology for the error.  How are you likely to respond:

  • "I bet the teller is merely a temporary employee to replace someone who is sick today.  It must be very frustrating."

  • " That bank made a mistake and never apologized to me.  How can it treat me so poorly?"

When we visit a bank, the teller is the bank in our perceptions at that point in time.  All of that person's behaviors, good and bad, are ascribed to the institution.  This person is a boundary spanner and plays a crucial role in our perceptions of the entire institution. 
When you call a large organization and reach a receptionist, the behaviors of that receptionist affect your perceptions of the entire organization - his or her voice and ability to respond to your request is the organization to you at the time.  It makes absolutely no sense that the receptionist is generally one of the most mistreated and lowest paid employees of many organizations.

On the other hand, it is no wonder that many organizations have dress codes for salespeople and supply company cars.  A salesperson who drives a sporty convertible might represent an image of youth, success, and quick response for one company, but might imply immaturity and inappropriate priorities to customers of another company.


ISSUES OF CUSTOMER EVALUATION

search qualities
tangible attributes that can be judged before the purchase of a product

experience qualities
attributes assessable only during purchase and consumption of a service

credence qualities
attributes that consumers might be unable to evaluate even after purchasing and consuming a service

What sorts of cues does a customer use to judge the quality of the work of an auto mechanic, an attorney, a surgeon, a business consultant, or a professor?  Before you purchase a desk, how can you evaluate it prior to purchase? Prior to surgery, can you evaluate the quality of the work that the surgeon is about to perform?  Even after the surgery has been performed, how can you possibly evaluate the quality of the work?

Given our inability to evaluate services, sometimes even after the performance of the service, we often rely on peripheral clues to form judgments about the service provider.  We might judge a surgeon on her bedside manner, a car mechanic on the neatness of his shop, an attorney on the quality of the furnishings in her office, or a business consultant on how interesting he appears in front of a group or how thick and complicated are his reports.

One of the problems to service providers is that consumers tend not to make any judgments, good or bad, unless something unusual happens.  Have you ever left an airport and said, "Gee, what an especially good airline - they didn't lose my bag, the flight was on time, and the airplane didn't crash"?  Given that the airline strives to provide high levels of service quality and consistency, it is unlikely that you will ever encounter service that you believe to be unusually good and above your expectations.  The airline which consistently provides good service never has an opportunity to show the customer just how good it is.  However, it is likely that you will someday encounter a long delay, a canceled flight, or a lost bag.  Some airlines see such attention getting events as opportunities to make a point that they provide good service by giving you a free flight for your inconvenience or replacing a damaged bag, with personal delivery, with a bag of obviously higher quality.


edited 4 JUL 05