Paper: 10, Services Marketing Module: 5, Goods Vs. Service Marketing

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1 Paper: 10, Services Marketing Module: 5, Goods Vs. Service Marketing

2 Goods Vs Service Marketing 1.0 Introduction For having a discussion on the difference between the marketing of Goods and services, it is important to first understand the meaning of goods and Services. Goods are the tangible articles which seek to satisfy the needs of the consumers in exchange of money to the manufacturer and marketer. Goods possess physical characteristics and may be consumed by the customers in a single use or for repeated uses. Usually the manufacturer produces goods in batches of identical products and there is a time gap between production and consumption of goods. This means that the goods can be stores as an inventory. Further, the products of a batch will have uniform specifications and features and are made available to the consumers in the same uniformity in all batches to the various markets. WE may consider examples of goods as books, furniture, soap etc. Services, on the other hand, are intangible offerings which seek to satisfy the needs of the consumers. Since services are produced and consumed at the same time, the involvement of the consumer in the service production and delivery is high. The task of improving service in organization is complex, it involves knowing what to do on multiple fronts such as Technology, Service System, Employee selection, Training & Education and Reward System. It involves knowing how to implement these actions and how to transform activity into sustainable development. While product quality is measured through its ability to meet the user s requirement and the value of its features and characteristics, service quality is more of a comparison of the customer expectations and the service performance. Though the principles of improving product quality are applicable to services as well, it s very important to know the focus areas of improvement with respect to increasing customer satisfaction when it comes to service quality management. Services are the intangible economic product that is provided by a person on the other person s demand. It is an activity carried out for someone else. They can only be delivered at a particular moment, and hence they are perishable in nature. They lack physical identity. Services cannot be distinguished from the service provider. The point of sale is the basis for consumption of services. Services cannot be owned but can only be utilized. You can understand this by an example: If you buy a ticket for watching a movie at the multiplex, it doesn t mean that you purchased the multiplex, but you have paid the price of availing services. Service receiver should fully participate when the service is provided. Evaluation of services is a relatively tough task because different service providers offer the same services but charges a different amount. It may be due to the method they provide services is different or the parameters they consider in valuing their services vary. Example: Postal services, banking, insurance, transport, communication, etc. Read more: There are obvious differences between goods and services that are analyzed based on characteristics of each. A good is a tangible object used either once or repeatedly. A service is intangible. The tangibility differentiator indicates the ability to touch, smell, taste and see which is absent in services. In the case of goods the ownership of the product is transferable from sellers to buyers, whereas in services there is no ownership involved. On the quality front, with goods it is homogeneous, once produced the quality is uniform across all line of products. They can be separated from the seller/ provider and not dependent on the source for its delivery to the purchaser. With regard to service it is inseparable from the service provider and heterogeneous, where each time the service is offered it may vary in quality, output, and delivery. It

3 cannot be controlled and is dependent on the human effort in achieving that quality hence is variable from producer, customer and daily basis. CHECK YOUR PROGRESS Fill in the Blanks:- 1. A is a tangible object used either once or repeatedly. 2. A service is. 3. Goods will have a long life. 4. In services there is no involved. 5. Once produced the is uniform across all line of products. Answers:- 1. good 2. intangible 3. storage 4. ownership 5.Quality Another key distinction is perishability of services and the non-perishability of goods. Goods will have a long storage life and are mostly non-perishable. Whereas services are delivered at that moment and do not have a long life or cannot be stored for repeat use. They do not bear the advantage of shelf life as in the case of goods like empty seats in airlines. With the production and consumption taking place simultaneously in services, it differs from goods on simultaneity and the provisions for quality control in the process. Both goods and services need not be driven by economic motives. Several times goods and services are linked closely and cannot be detached. For example on purchase of a car, the good is the car but the processing, the provision of accessories, after sales activities are all services. It is essential to note that the difference between pure goods and pure services are in contrast but most goods and services exist in between with a mix of both. Key Words: Goods, Customer satisfaction, Quality 1.2 Learning Objectives- After studying this chapter, you should be able to know, a) Marketing services versus physical goods b) The basic difference between goods and services 1.3 MARKETING SERVICES VERSUS PHYSICAL GOODS 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. 1.4 Basic Differences between Goods and Services

4 Goods can be described as physical objects or devices and services are actions or performances. 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. Although these characteristics are still cited, they have been criticized for over-simplifying the real world environment. It's important to note that in identifying these differences we're still dealing with generalizations that do not apply equally to all services. We also need to draw a distinction between marketing of servicesand 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 differences in more detail. Tool box 1 Diffrence between goods and services four generic differences, between goods and services referred to as intangibility, heterogeneity (or variability), perishability of output, and simultaneity of production and consumption Goods services 1. tangible intangible 2. homogenous heterogeneity 3. inpershabillity perishability 4. different timings of production and consumption simultaneity of production and consumption Customers Do Not Obtain Ownership Perhaps the key distinction between goods and services lies in the fact that customers usually derive value from serviceswithout obtaining permanent ownership of any substantial tangible elements. In manyinstances, service marketers offer customers the opportunity to rent the use of a physical object like a car or hotel room, or to hire the labour and skills of people whose expertise ranges from brain surgery to knowing how to check customers into a hotel. As a purchaser 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

5 normally comes specifically from its tangible elements, even though it may provide intangible benefits, too. Intangibility presents several marketing challenges. Services cannot be inventoried, and therefore fluctuations in demand are often difficult to manage. For example there is tremendous demand for resort accommodations in phoenix in February, but little demand in July. Yet resort owners have the same number of rooms to sell year-round. Services cannot be readily displayed new service concepts can therefore easily be copied by competitors. Services cannot be readily displayed or easily communicated to customers, so quality may be difficult for consumers to assess. Decision about what to include in advertising and other promotional materials are challenging, as is pricing. The actual cost of a unit of service are hard to determine, and the price-quality relationship is complex. 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 ATM) or by cooperating with service personnel in settings such as hair salons, hotels,colleges, or hospitals. 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 employeesis a challenging task. Tool Box 2 Basic Differences between Goods and Services Customers Do Not Obtain Ownership Service Products as Intangible Performances Customer Involvement in the Production Process People as Part of the Product Greater Variability in Operational Inputs and Outputs Harder for Customers to Evaluate No Inventories for Services Heterogeneity Importance of the Time Factor Different Distribution Channels 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. Manufacturedgoods 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

6 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. Harder for Customers to Evaluate Service performances especially those that contain few tangible clues can be difficult for consumers to evaluate. As a result, there is a greater risk of making a purchase that proves to be disappointing. If a customer buys a physical good that proves unsatisfactory, the product can usually be returned or replaced, although this action may require extra effort on the customer's part. These options are not as readily available with services, although some services can be repeated.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. 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. Heterogeneity Because services are performances, frequently produced by humans, no two services will be precisely alike. The employees delivering the services frequently are the service in the customer s eyes, and people may differ in their performance from day to day or even hour to hour. Heterogeneity also results because no two customers are precisely alike; each will have unique demands or experience the service in a unique way. Thus the heterogeneity connected with services is largely the result of human interaction and all of the vagaries that accompany it. For example, a tax accountant may provide a different service experience to two different customers on the same day depending on their individual needs and personalities and on whether the accountant is interviewing them when he or she is fresh in the morning or tired at the end of a long day of meetings. CHECK YOUR PROGRESS Q 1. Does service transer the ownership? Q 2. How customers involved in creating service product? Q 3. people as part of product comment on it. Q 4. Critically evaluate marketing challenges with reference to intangibility of services. Q 5. Explain intangibile performance of service products. Q 6. What are the effects of presence of personnel and customers in operation system? Q 7. What are diffrent attributes while purchasing goods and services?

7 Q 8. Why there is no inventories reqirement for sevices? Q 9. What do you understand by heterogenity in services? 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 behaviour of customers in the service factory to ensure smoothly running operations and to avoid situations in which one person's behaviour irritates other customers who are present at the same time. CHECK YOUR PROGRESS Write short note on:- 1. Goods 2. Services 3. Variability of services 4. Experience attributes during services 5. Credence attributes 6. importance of time factor during services 7. Role of distribution channels for services 1.5 Conclusion Normally, companies keep a stock of goods with itself in order to fulfil urgent requirement of goods. It also keeps track of the quantity of goods at the beginning and the end. In contrast to services are delivered as per the request of the customer itself. In short, the production of services depends on the customer s demand. Both are subject to tax like value Added Tax is levied on goods while service tax on services provided. Sometimes products offered by the companies in such a way that it is difficult to segregate goods and services like in case of restaurant, you pay for the food you eat as well as for the add on services of the waiters, chef, watchman and so on.

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