What do we really know as managers about differences between the marketing of goods and the marketing of services?
Where does marketing of services come from?
Over the last couple of decades, the Western world has seen a big change. The decline in the secondary sector (traditional manufacturing) and the growth in importance of the tertiary sector (modern services). A tremendous increase in tertiary services at the expense of secondary production is called de-industrialization.
A growth in professional service economies such as banking services, air-travel services, after-class extracurricular education for children, etc. has caused them to be standardized around the world. In addition to selling traditional physical goods, many multinational companies have started providing services.
Therefore, we have seen the adaptation of the regular 4Ps of the Marketing Mix for goods into the 7Ps of the Marketing Mix for services including Physical Evidence, Process and People.
What are goods and what are services?
GOODS: A good is a tangible item made of the material which customers can touch and own. Goods are about real things. For instance, a car, a pair of shoes, a computer, a table, etc.
SERVICES: A service is an action of doing something for someone else. It is not made of the materials hence it is intangible. Services are about experiences. For instance, taking a TAXI, attending a business lesson, having a haircut, a train trip from Paris to London, etc.
Introduction to the 4Ps of the marketing of services
Both the marketing of goods and the marketing of services use researching and developing new products, promotion to build brand recognition, brand awareness and trust, using appropriate pricing strategy to generate profits and suitable location to deliver the products to customers.
1. Product strategy. A business selling services must first decide whether it will be offering standardized services or customized services per each individual customer. While standardized services enable the firm to serve more customers faster, the companies providing customized services can offer a tailored experience. Some companies provide value-added services to attract customers in addition to selling only goods. This includes supermarkets and restaurants offering home delivery services, banks selling gold and silver coins, or universities selling hoodies and other merchandize with the university logo on them.
2. Price strategy. Pricing services is not easy for marketers as it is difficult to get the right pricing strategy the first time. Firstly, the appropriate pricing strategy should both appeal to customers, cover the costs of delivering the service and generate profits for the firm. And secondly, the value for customers can come from the final benefit they receive, the expertise required to provide the service or the time spent on serving the customer. All these need to be reflected in the price to some extent, hence the cost and the price of services can to be quite high.
3. Promotional strategy. Promoting services is challenging for Marketing Managers because services are intangible, so customers cannot see them. Therefore, in order to help customers to visualize the quality of services being provided, companies use promotional strategies related to the visible aspect of services. This includes emphasizing attractive physical environment, the use of branding to create a certain image, catchy slogans, memorable logos, etc.
4. Place / Distribution strategy. The location decision is way more important when we talk about services than for goods. Services are all about serving the people, therefore businesses should pick the most convenient locations. It is because customers are very unlikely to visit banks, restaurants, schools, hotels, theatres, retail stores, ATMs, supermarkets, etc. in remote locations far away from the downtown. Being close to customers through convenient location is vital for any company offering services.
Major differences between marketing of goods and marketing services
Let’s take a look at the major differences between the marketing of goods and services. The differences between the marketing of goods and services include the following five characteristics:
1. Intangibility
Cannot be touched.
Goods are tangible. The buyer purchases tangible goods. These are real physical objects which can be touched and viewed. It is easy to tell customers in advance what they will be getting because they can see the items. Marketers must emphasize physical attributes to the clients. They must talk about the physical presence of the good. The purchase is usually based on inspecting the good before buying.
For example, cars, clothes, cosmetics and airplanes can be touched and are visible.
Services are intangible. The buyer purchases intangible services. These are experiences which cannot be touched and viewed. It is difficult to tell customers in advance what they will be getting because they cannot see the experiences. Marketers must communicate the benefits of the service to the clients. They must talk about the nature of the service. The purchase is usually based on reputation, trust and image.
For example, car insurance or health insurance as the financial services cannot be touched even though there is a tangible insurance policy in the form of a certificate.
2. Inseparability
Consumed at the time of purchase.
Goods are separable. The buyer purchases separable goods. Separable from the point where it is consumed and from the producer of the good. Separability of production and consumption means that the good is not being produced at the same time when the client is receiving it, but earlier. It is possible to separate the production from consumption of the good. Companies do need to train workers at producing durable goods.
For example, music CDs and movie DVDs can be purchased in the morning and watched at home in the evening.
Services are inseparable. The buyer purchases inseparable services. Inseparable from the point where it is consumed and from the provider of the service. Inseparability of production and consumption means that the service is being provided at the same time when the client is receiving it. It is not possible to separate the production from consumption of the service. Companies need to train workers at providing outstanding and consistent customer services.
For example, a live concert performance or watching a movie at the cinema as the entertainment services themselves cannot be consumed at the other time.
3. Heterogeneity (Variability)
Different customer, different experience.
Goods are homogenic. The buyer purchases homogenic goods. Goods are homogeneous because all customers receive identical products. It is easy to compare the quality of similar goods. The involvement of machines in producing goods means that many products will be completely identical. Also, the same machine will make the particular good identically at different times. It is important for marketers to minimize the differences in goods through maintenance of machinery and quality control.
For example, soda drinks, books, smartphones, computers, etc. are identical when mass produced. There are not even slight differences between those products.
Services are heterogenic. The buyer purchases heterogenic services. Services are heterogeneous because different customers have different experiences. It is difficult to compare the quality of similar services. The involvement of humans in providing services means that no two services will be completely identical. Also, the same person will deliver the particular service differently at different times. It is important for marketers to minimize the differences in performance through training and setting standards.
For example, having your smartphone fixed by the same serviceman might give you different level of customer satisfaction or the length of time when the service is completed. Going to the coffee shop to read the book one day can provide you with excellent service by a certain barista, and completely poor experience the next day in the same coffee shop reading the same book but being served by a different employee.
4. Perishability
Cannot be stored.
Goods are storable. The buyer purchases storable goods. Unused capacity can be stored for future use. Once it has been produced, it can be moved around many places and the good remains the same. The customer can return the good anytime.
For example, millions of cans of Coca-Cola and Pepsi can be stored in warehouses for a long time before being distributed around the world to different wholesalers and retailers.
Services are perishable. The buyer purchases perishable services. Unused capacity cannot be stored for future use. Perishable in that once it has occurred it cannot be repeated in exactly the same way. The customer cannot return the service once its finished.
For example, a soccer game during European Champions League where spectators drink cola during the game cannot be repeated. There will be no such game anymore. Also, any empty seats in the stadium mean a loss in sales revenue from entrance tickets as spare seats cannot be transferred or saved up until the next game.
5. No rights of ownership
Cannot be legally owned.
Goods have rights of ownership. The buyer purchases goods with the right of ownership. Right of ownership is taken to the good, since the customer owns it. The customer can sell it on once it belongs to him as he takes ownership of the good.
For example, a serviceman fixes air-conditioners which you own in your house. These air-conditioning units belong to you and you have all the ownership rights.
Services have no rights of ownership. The buyer purchases services without the right of ownership. Right of ownership is not taken to the service, since the customer only experiences it. The customer cannot sell it on once it has been consumed as he does not take ownership of it.
For example, you do not own the service when the serviceman fixes your air-conditioning system nor you own his electrical tools. Neither you own that servicemen while he is servicing your air-conditioners.
How to overcome pitfalls of the marketing of services?
When it comes to the marketing of services, people often try to overcome some of these difficulties by ensuring that the physical manifestations of the service such as the people running it, the library building, printed search results, web pages indicate the quality of the service. The people running the service are more likely to inspire confidence in the service, if they are responsive, reliable, courteous, and competent. If the information center looks shabby and disorganized, or if the website is difficult to navigate with broken links, then users may assume that the services provided by the center are slapdash.
Knowledge scientists like myself are often providing services (e.g. knowledgeable articles, professional advice or personalized searches), rather than physically distinct goods. Marketing experts acknowledge that marketing a service is more difficult than marketing a tangible good. Obviously, if a ramshackle library is providing a consistently good service then its users will become convinced of its quality, but it will take longer to build that perception.
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TEXTBOOKS about the marketing of services:
There are many textbooks dealing with the marketing of services, for example:
1. ‘Principles of Services Marketing’ by Adrian Palmer. Publisher is McGraw-Hill.
2. ‘Services Marketing’ by Valeria Zeithaml, Mary Jo Bitner and Dwayne Gremler. Publisher is McGraw-Hill.
ACADEMIC JOURNALS about the marketing of services:
There are also specialist journals such as The Journal of Services Marketing and many specialized articles about the marketing of services, for example:
1. ‘An Investigation into Four Characteristics of Services’ by Russell Wolak, Stavros Kalafatis and Patricia Harris. Publisher is Journal of Empirical Generalisations in Marketing Science.
