Services Marketing: The Difference Between Services and Goods
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- 0:10 Services
- 0:44 Marketing Services
- 4:15 Product Strategies
- 8:25 Lesson Summary
In this lesson, you'll learn the difference between a service and a good. Discover how services are marketed to a consumer using different techniques.
Our ninja was in a massive fight last night. He has sustained some injuries and now needs to go to a doctor. His interest is not in buying a product but in getting the best medical services. A service is the result of applying human or mechanical efforts to people or objects. Examples of services included medical care, landscaping, child-care, counseling and salon treatments. The previous lectures have all discussed how to market both products and services. There are a few unique characteristics regarding marketing services compared to marketing a good.
The ninja needs medical attention and is in search for a highly recommended doctor. The ninja's exam will be a service, and it can be categorized by being intangible, inseparable, heterogeneous and perishable. These four characteristics are important for marketers to understand before they create a marketing mix for a service.
The most basic difference between a good and a service is intangibility. This means that the service can't be heard, felt, touched, seen or tasted. This causes services to be very difficult to evaluate and also have good search qualities. Search Qualities are characteristics that are easily reviewed before a purchase occurs. This also makes it a challenge for marketers to communicate the benefits of the service. Many service oriented companies create a tangible representation to help their consumers understand what they are all about. For example, the doctor's office our ninja is considering for a checkup uses a photograph of vitamins to represent that their services will make you healthy. Another big difference is that product goods are produced, sold and then consumed, which is not at all how a service is delivered.
Services are impossible to separate in the purchase process. Can you imagine buying a haircut but not being at the salon to get your hair trimmed? Inseparability is the inability of the production and consumption of a service to be separated. One advantage to the inseparability is that consumers can give constant feedback. For example, our ninja can tell his barber exactly what changes he wants as he is getting his hair cut. One challenge for service companies is that they must be sure to have very well trained employees who are adept at providing excellent services. The quality must be consistent.
Services must be consistent and also reliable. Let us think about when our ninja goes for his weekly pizza run. He expects his pizza to be delivered exactly the same way and taste just as delicious as the previous week. Heterogeneity is also known as variability and is one challenge facing service oriented companies. It is when services have problems being standardized. The barber shop that the ninja used to go to gave him an excellent buzz cut for two months. Then the last two times he went for a cut, he ended up with a very poor result. This unintentional variability in service has now caused him to go elsewhere.
Fast food companies spend enormous amounts of money creating quality, standardized food across all of their stores. For example, if you order a hamburger at a McDonalds in Texas or Maine, the burger should taste the same. The most important factor in maintaining no variability is through excellent training and set procedures.
The last characteristic of services is called perishability, which means that they cannot be stored, warehoused, or inventoried. It is not as if our ninja can order up six haircuts and store them in his hideout. This is a major challenge to a service provider as any service time that is not used equals a loss in revenue. For example, for every airline seat that sits empty the airline company is facing a loss in profit. The same concern exists for the barber shop. The ninja barber shop must keep their barbers busy cutting hair and not sitting idly by.
Product Strategy for Services
Since a service company has different characteristics to its overall marketing plan, there also has to be some adjustments in the marketing mix. Many service companies offer core and supplemental service product offerings. For example, the ninja cannot just go to the barber shop to get his hair cut (which would be a core offering), but also to have a massage, his beard trimmed and even enjoy free coffee while he waits (which is the supplemental product offerings). Service companies also have to decide on whether their offerings will be standardized or customized. For example, if our ninja wants his taxes done he can go to a 1-800-Ninja Tax office and have them completed for $99. Or the ninja can go to a CPA firm and more customized service, but then of course the price tag will be higher.
Place Strategy for Services
There are a few issues service companies must consider with distribution. They must consider the location, scheduling, convenience, number of outlets and direct versus indirect distribution. Location is very important to service companies, such as hotels and banks. They spend enormous amounts of time researching the best location to offer their services to the largest amount of their target market.
Scheduling is one of the most important issues that customers are concerned about. Consumers want their services at the best time that works for them. For example, the ninja family has decided to visit their relatives in Texas, so they are very concerned with getting the best flight schedule. Nobody in the ninja family wants a flight departure time of 7am. When the ninja children were sick last week, Mother Ninja searched around to find the best medical clinic with the best hours.
Overall convenience is another huge driver of service location. Consumers want to easily access services, such as having ATMs in supermarkets, or restaurants such as Outback Steakhouse, which offers takeout food brought to their cars.
Service companies need to decide on the number of outlets that they will have and also if they are using indirect/direct distribution. Ninjas prefer to get their hair cut at the exclusive barber shop with only one location instead of a franchise with many locations. The ninja feels that the one barber shop is more exclusive and delivers a better service and better haircuts. The ninja family also prefers indirect distribution when purchasing concert tickets through the internet. A direct distribution example would be if the ninja teenager bought them from a ticket box office. The location of a service depends on so many different marketing objective variables.
Promotion Strategy for Services
Promoting a service can be a very big challenge to marketers because they are hard to evaluate. Marketers can try to use a tangible cue to allow the consumer to visualize why their service is superior. For example, Allstate Insurance uses 'you are in good hands with Allstate' and has a pair of hands reaching out to protect. Celebrity endorsements are also very effective in promoting a service. For example, William Shatner promotes saving hotel and airline costs by endorsing Priceline.com.
The third way of promoting a service would be to create a consistent corporate image. Disney offers a strong image with their Cinderella Castle and use of the color blue. The Ninja Corporation uses a strong black color and the image of a black cape to represent protection for their martial arts security division.
Price Strategy for Services
The biggest challenge in developing a pricing strategy for a service is to determine what the price is dependent upon. For example, is the price based on a specific task such as the ninja getting his hair cut or is it based on the length of time it takes to accomplish the service? Service companies also need to determine whether the price should be for a bundled offering or priced separately. For example, our ninja wants a wash, cut, blow dry and beard trim today. Will the barber shop offer the ninja a total price for the bundled service of $80 or will each service be priced out?
There are many unique differences in marketing a product than marketing a service. The main characteristic differences are intangibility, inseparability, heterogeneity and perishability. The marketing manager must also make adjustments in the marketing mix for a service. A marketer must make sure the service is offered to the consumer at the correct time, place, price and promotion. They must take into account that convenience, location and the ability to create a tangible cue to the service are the most important aspects of service marketing.
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