chapter 3 fundamental differences between goods and services

Chapter 3Fundamental Differences Between Goods and Services

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Chapter Objectives

• Understand the characteristics of intangibility, inseparability, heterogeneity, and perishability.

• Discuss the marketing problems associated with intangibility and their possible solutions.

• Describe the marketing problems associated with inseparability and their possible solutions.

• Explain the marketing problems associated with heterogeneity and their possible solutions.

• Identify the marketing problems associated with perishability and their possible solutions.

• Consider the impact of intangibility, inseparability, heterogeneity, and perishability on marketing’s relationship to other functions within the service organization.

©2011 Cengage Learning. All rights reserved.

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Opening Vignette: Bed Wars


• Westin Hotels first introduced the “Heavenly Bed” in 1999 at a $30 million price tag

• Marriott International investment in the “Battle of Beds” in 2005 at an estimated $190 million

• Most recent, an array of pillow selections

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Intangibility

VS.


• Pick up the shoes• Feel the quality of

materials• View specific

style and color• Sample the fit

• Entitles the consumer to an experience

• Subjectively evaluated

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Figure 3.1: Marketing Challenges and Solutions Pertaining to Intangibility

Marketing Problems Possible SolutionsServices cannot be inventoried

Use of tangible clues to help “tangibilize”

Lack of patent protection and can be easily copied

Use of personal sources of information

Difficulty in displaying or explain to customers

Creation of a strong organizational image

Difficulty in pricing strategies

Utilize an activity-based costing approach


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Marketing Problems caused by Intangibility

1. Lack of service inventories

2. Not protected by patents

3. Not easily displayed or

communicated

4. Pricing is difficult


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• Use tangible clues/physical evidence• Quality furniture in a lawyer’s office• Appearance of the personnel

• Utilize personal sources of information• Family, friends, and other opinion leaders

• Create a strong organizational image• Utilize an activity-based costing

approach


Possible Solutions for Intangibility

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Marketing Problems Possible Solutions

Physical connection of the service provide to the service

Selecting and training public contact personnel

Involvement of the customer in the production process

Effectively managing consumers

Involvement of other customers in the production process

Use of multisite location

Special challenges in mass production of services


Figure 3.2: Marketing Challenges and Solutions Pertaining to Inseparability

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Marketing Problems caused by Inseparability


• Service provider is involved in the production process

• Customer is involved in the production process

• Other customers are involved in the production process (shared experience)

• The mass production of services presents special challenges

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Customer is involved in the production process

• Involvement may vary

• Impact on the type of service desired

• cycle of service demand

• length of the delivery process

• Service factory must be built with the customer’s presence in mind

OPINION QUESTION:

If given the choice of dining at one of two new restaurants, would you select a restaurant that had no cars in the parking lot, or would you choose a restaurant down the street with a full parking lot?


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Possible Solutions for Inseparability


• Selecting and training public contact personnel

• Develop strategies to manage consumers

• Develop multi-site locations

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Figure 3.3: Heterogeneity-Marketing Challenges and Possible Solutions

Marketing Problems Possible SolutionsDifficult to standardize service and quality control

Customization

Standardization


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Marketing Problems caused by Heterogeneity

• Standardization and quality control are difficult to achieve


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Possible Solutions for Heterogeneity

• Customization Strategy

• Constructed to fit customer’s exact needs

• Standardization Strategy

• Faster

• Less expensive

• More consistent


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Marketing Problems

Possible Solutions Demand

Possible Solutions Supply

Demand exceeds supply

Creative pricing Part time employees

Demand exceeds optimal levels of supply

Reservation system

Share capacity with other providers

Lower demand than optimal supply level

Shift to complementary services

Prepare for expansion in advance

Nonpeak demand

Utilize third parties

Customer participation


Figure 3.4: Perishability-Marketing Challenges and

Possible Solutions

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Marketing Problems caused by Perishability

• Matching supply and demand • Demand exceeds maximum available

supply

• Demand exceeds optimum supply level

• Demand is below optimal levels of supply

• Demand and supply are at optimal levels


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Possible Solutions for Perishability

• Creative pricing • Reservation systems• Complementary

services• Developing nonpeak

demand– utilizing nonpeak

periods to prepare for peak periods

– appeal to different market segments with different demand patterns


Demand Strategies

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Possible Solution for Perishability

• Utilize part-time employees

• Share capacity

• Prepare in advance for expansion

• Utilize third-parties

• Increase customer participation


Supply Strategies

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The Structure of This Text

• An Overview of Services Marketing

• The Tactical Services Marketing Mix

• Implementing Successful Service Strategies


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Figure 3.5: Overview of Services Marketing Chapters


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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic,

mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

Copyright © 2011 Cengage Learning.


chapter 3 fundamental differences between goods and services

Documents

cengage learning

inseparability slide

services slide

marketing challenges

evaluated slide

production process customer

mass production of services

impact of intangibility