The dynamic
environment of services today places a premium on effective marketing. Although
it's still very important to run an efficient operation, it no longer
guarantees success.The service product must be tailored to customer needs,
priced realistically, distributed through convenient channels, and actively
promoted to customers. New market entrants are positioning their services to
appeal to specific market segments through their pricing, communication efforts,
and service delivery, rather than trying to be all things to all people. But
are the marketing skills that have been developed in manufacturing companies
directly transferable to service organizations? The answer is often no, because
marketing management tasks in the service sector tend to differ from those in the
manufacturing sector in several important respects.
Basic
Differences Between Goods and Services
Every product—a
term used in this book to describe the core output of any type of industry—delivers
benefits to the customers who purchase and use them. Goods can be described
as physical objects or devices and services are actions or performances.6)
Early research into services sought to differentiate them from goods, focusing
particularly on four generic differences, referred to as intangibility,
heterogeneity (or variability), perishability of output, and simultaneity of
production and consumption.7) Although these characteristics are still cited,
they have been criticized for over-simplifying the realworld environment. More
practical insights, which lists nine basic differences that can help us to
distinguish the tasks associated with service marketing and management from
those involved with physical goods. It's important to note that in identifying
these differences we're still dealing with generalizations that do not apply
equally to all services. In Chapter 2, we classify services into distinct
categories, each of which presents somewhat different challenges for marketers and
other managers. We also need to draw a distinction between marketing of
services and marketing goods through service. In the former, it's
the service itself that is being sold and in the latter, service is
added—usually free of charge—to enhance the appeal of a manufactured product.
Now, let's examine each of the nine differences in more detail.
Customers Do Not
Obtain Ownership
Perhaps the key distinction between goods
and services lies in the fact that customers usually derive value from services
without obtaining permanent ownership of any substantial tangible elements. In
many instances, service marketers offer customers the opportunity to rent the
use of a physical object like a car or hotel room, or to hire the labor and
skills of people whose expertise ranges from brain surgery to knowing how to check
customers into a hotel. As apurchaser of services yourself, you know that
"while your main interest is in the final output, the way in which you are
treated during service delivery can also have an important impact on your
satisfaction.
Service Products
as Intangible Performances
Although
services often include tangible elements—such as sitting in an airline seat,
eating a meal, or getting damaged equipment repaired—the service performance
itself is basically an intangible. The benefits of owning and using a
manufactured product come from its physical
characteristics
(although brand image may convey benefits, too). In services, the benefits come
from the nature of the performance. The notion of service as a performance that
cannot be wrapped up and taken away leads to the use of a theatrical metaphor
for service management, visualizing service delivery as similar to the staging
of a play with service personnel as the actors and customers as the audience. Some
services, such as rentals, include a physical object like a car or a power
tool.
But marketing a
car rental performance is very different from attempting to market the physical
object alone. For instance, in car rentals, customers usually reserve a
particular category of vehicle, rather than a specific brand and model. Instead
of worrying about styling, colors, and upholstery, customers focus on price,
location and appearance of pickup and delivery facilities, extent of insurance
coverage, cleanliness and maintenance of vehicles, provision of free shuttle
buses at airports, availability of 24-hour reservations service, hours when
rental locations are staffed, and quality of service provided by customer- contact
personnel. By contrast, the core benefit derived from owning a physical good
normally comes specifically from its tangible elements, even though it may
provide intangible benefits, too. An interesting way to distinguish between
goods and services is to place them on a scale from tangible dominant to
intangible dominant.
Customer
Involvement in the Production Process
Performing a
service involves assembling and delivering the output of a combination of
physical facilities and mental or physical labor. Often, customers are actively
involved in helping create the service product, either by serving themselves
(as in using a laundromat or ATM) or by cooperating with service personnel in
settings such as hair salons, hotels, colleges, or hospitals. As we "will
see in Chapter 2, services can be categorized according to the extent of
contact that the customer has with the service organization.
People as Part
of the Product
In high-contact
services, customers not only come into contact with service personnel, but they
may also rub shoulders with other customers (literally so, if they ride a bus
or subway during the rush hour).The difference between service businesses often
lies in the quality of employees serving the customers. Similarly, the type of
customers who patronize a particular service business helps to define the
nature of the service experience. As such, people become part of the product in
many services. Managing these service encounters—especially those between customers
and service employees—is a challenging task.
Greater
Variability in Operational Inputs and Outputs
The presence of personnel
and other customers in the operational system makes it difficult to
standardize and
control variability in both service inputs and outputs. Manufactured goods
can be produced under controlled conditions, designed to optimize both productivity
and quality, and then checked for conformance with quality standards long before
they reach the customer. (Of course, their subsequent use by customers will
vary widely, reflecting customer needs and skills, as well as the nature of the
usage occasion.) However, when services are consumed as they are produced,
final "assembly" must take place under real-time conditions, which
may vary from customer to customer and even from one time of the day to
another. As a result, mistakes and shortcomings are both more likely and harder
to conceal. These factors make it difficult for service organizations to
improve productivity, control quality, and offer a consistent product. As a
former packaged goods marketer observed some years ago after moving to a new position
at Holiday Inn:
We can't control
the quality of our product as well as a Procter and Gamble control engineer on
a production line can. . . . Wlien you buy a box of Tide, you can reasonably be
99 and 44/100ths percent sure that this stuff will work to get your clothes
clean. When you buy a Holiday Inn room, you're sure at some lesser percentage
that it will work to give you a good night's sleep without any hassle, or
people banging on the walls and all the bad things that can happen in a hotel.9)
Not all
variations in service delivery are necessarily negative. Modern service
businesses are recognizing the value of customizing at least some aspects of
the service offering to the needs and expectations of individual customers. In
some fields, like health care, customization is essential.10)
Harder for
Customers to Evaluate
Most physical
goods tend to be relatively high in "search attributes ."These are
characteristics that a customer can determine prior to purchasing a product,
such as color, style, shape, price, fit, feel, and smell. Other goods and some
services, by contrast, may emphasize "experience attributes" that can
only be discerned after purchase or during consumption (e.g., taste,
wearability, ease of handling, quietness, and personal treatment). Finally,
there are "credence attributes"—characteristics that customers find
hard to evaluate even after consumption. Examples include surgery and auto
repairs, where the results of the service delivery may not be readily
visible.11)
No Inventories
for Services
Because a
service is a deed or performance, rather than a tangible item that the customer
keeps, it is "perishable" and cannot be inventoried. Of course, the
necessary facilities, equipment, and labor can be held in readiness to create
the service, but these simply represent productive capacity, not the product
itself. Having unused capacity in a service business is rather like running
water into a sink without a stopper. The flow is wasted unless customers (or
possessions requiring service) are present to receive it. When demand exceeds
capacity, customers may be sent away disappointed, since no inventory is available
for backup. An important task for service marketers, therefore, is to find ways
of smoothing demand levels to
match capacity.
Importance of
the Time Factor
Many services
are delivered in real time. Customers have to be physically present to receive
service from organizations such as airlines, hospitals, haircutters, and
restaurants. There are limits as to how long customers are willing to be kept
waiting and service must be delivered fast enough so that customers do not
waste time receiving service. Even when service takes place in the back office,
customers have expectations about how long a particular task should take to complete—whether
it is repairing a machine, completing a research report, cleaning a
suit, or
preparing a legal document.Today's customers are increasingly time sensitive
and speed is often a key element in good service.
Different
Distribution Channels
Unlike
manufacturers that require physical distribution channels to move goods from
factory to customers, many service businesses either use electronic channels
(as in broadcasting or electronic funds transfer) or combine the service
factory, retail outlet, and point of consumption at a single location. In the
latter instance, service firms are responsible for managing customer-contact personnel.
They may also have to manage the behavior of customers in the service factory
to ensure smoothly running operations and to avoid situations in which one person's
behavior irritates other customers who are present at the same time.
