Know-How Exchange : Student Questions

The difference is quite real because of the characteristics of services:

Intangibility -- it's not physical, cannot be "possessed," can't be seen, felt, etc. the ability to reduce consumer uncertainty through tangible signals is diminished. Consequently service marketers must determine how to effectively communicate the service process and final outcome the consumer will receive -- and the quality. (And By the way, quality is ultimately determined by the consumer, not you. They determine what quality they value, and you won't know unless you ask them. It's not about "zero defects" but client expectations.)

Inseparability -- that is, the production of the services can't be separated from its consumption. For example, the production and consumption of a medical exam happen together. This means that the consumer often expects the service to be provided in a specific way or by a specific individual -- and that means a bigger burden on the image, knowledge, attititude, appearance, etc. of the person delivering the service.

Perishability -- you can't store services for future use. When a client misses an appointment with his attorney, that time can never be recaptured. Empty hotel rooms, unsold theater tickets -- the value has vanished. It's supply and demand. Another issue has to do with performance -- which is what service marketers are really selling. When the demand fluctuates, it may be difficult to maintain the same consistency. For example, a CPA at tax time has difficulty giving the same level of attention/performance as at other times of the year.

Variability -- sometimes called "heterogeneity," services quality and consistency is subject to great variability because they are delivered by people and human behavior is difficult to control. Because services are people based, quality can vary of time of day (people get tired), experience, attitude, knowledge, style, etc. Maintaining client trust during lapses (which will happen) is critical. And this is why it can be very dangerous to a client relationship to have one person make the sale and establish the relationship, and another person deliver the service. The original personal contact reduced risk in the mind of the consumer and they may become agitated when someone else must deliver the service.

There are two other factors that separate services from hard goods.

First, the satisfaction criterion is different. With a hard good, the consumer can access the product (a car, washing machine, etc.) and see/test it. A consumer will never know how good the service is until AFTER he gets it! This can be unsettling for the consumer.

Second, with a service, the consumer is, essentially, "in the factory," watching production all along the way. It is VERY important for a service provider or consultant to carefully manage the "production process" as the client is able to observe it and make judgments about quality and value.

So you see, there is a BIG difference just in characteristics between the products and services.

For further information, I suggest you read Philip Kotler's book Marketing Professional Services. It's excellent. In it he describes ten distinctive problems faced by marketers of services:
1. Third-party accountability
2. Client uncertainty
3. Demonstrating experience
4. Limited differentiability
5. Maintaining quality control
6. Making the "do-ers" the sellers
7. Allocating time to marketing
8. Pressure to react rather than be proactive
9. Conflicting views about advertising
10. A limited marketing knowledge base

While Kotler's focus is on professional services (lawyers, architects, doctors, CPAs), it is invaluable for technology and other service sectors as well.

Good luck!

Lovely answer from ccoldren – one of the best definitions of a service I’ve read.

Perhaps I could venture a reason why services are referred to as a “Product” as in “The product we are promoting is an emergency valve replacement and maintenance service”

It used to be used almost entirely, but sadly not exclusively, in internal sales and marketing documents and discussions. Sadly because the “product” may be comprehensible to those in the know within the company or its agencies, but it rarely conveys much meaning in the world of the customer.

This is down to a need to hang marketing projects onto something tangible within the context of a corporation. As a service needs to be accompanied by endless descriptions, justifications and a raison d’etre for its existence within a company, it becomes a lot easier to package it as a product. A service you are going to sell does not yet exist. It consists of a series of rules, protocols, procedures and actions which once put in place, will deliver a benefit to a customer.

As a putative service consumes resources (leaflets, marketing materials, advertising budgets, management time, meeting space and lots of coffee and biscuits) without producing any revenue (Or even the immediate physical presence which hints at future revenue such as stock-in hand – you can’t store service on a shelf as inventory) it became more acceptable to the financial arm of most corporations to let Marketing define their service offering as a product.

As such it could be explained more easily to the company stakeholders. It was easier to package for playing pass-the-parcel through endless committees and meetings. In short, calling it a product saved a lot of people a lot of time, having to justify and re-hash as lot of arguments. The product was really the project to launce the service, but inevitably it became inexorably mixed up with the service itself. The “product” became something which was easier to hang a sales plan and a projected P&L account on to.

Hopefully, once the “Product” is launched on an unsuspecting public, it should lose all the trappings of being a product but it is noticeable in 2005 that many pure services are starting to be described in advertising as “One our products” or spoken of as in, “Our products are backed by 200 years of auditing experience”

In short, I think that the service as a product will not go away as it allows marketers to package many intangible benefits into something that they can at least allude to as being concrete.

Here endeth the lesson!

Steve Alker
Unimax Solutions