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Chapter 2: Fundamental Differences Between Goods and Services

Chapter 2: Fundamental Differences Between Goods and Services

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Published by hope78
these are service sector mgmt note whic u ppl can use ...they are quite good
these are service sector mgmt note whic u ppl can use ...they are quite good

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Published by: hope78 on Oct 02, 2009
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"It is wrong to imply that services are just like goods ‘except’ for intangibility. By suchlogic, apples are just like oranges, except for their ‘appleness.’”G. Lynn Shostack 
Chapter Objectives:
This chapter discusses the basic differences between goods and services, themarketing problems that arise due to these differences, and possible solutions to theproblems created by these differences.
Learning Objectives:
After reading this chapter, you should be able to
1. Understand the characteristics of intangibility, inseparability, heterogeneity,and perishability.
Simply stated, intangibility means that services have no substance and thereforecannot be touched or evaluated like goods. Inseparability refers to theinteraction and physical presence of the service provider and the consumer throughout the service experience. The heterogeneity of services pertains to thevariability that is inherent in the service delivery process. Perishability refers tothe service provider’s inability to store or inventory services. Services which arenot used at their appointed time, cease to exist.
2. Discuss the marketing problems associated with intangibility and their possible solutions.
Since services are intangible, the marketing problems that arise include: (1) it isdifficult to easily display or communicate the properties of services toconsumers; (2) prices are difficult to set; (3) services are not patentable, thusthey are easily copied by competitors; and (4) services cannot be stored for future use. Solutions suggested to minimize the problems associated withintangibility include: (1) utilizing tangible clues to influence customer perceptionsof service delivery; (2) developing promotional plans that emphasize personalsources of information as opposed to nonpersonal; and (3) developing theorganization's image to reduce customer levels of perceived risk.
Chapter 2 Fundamental Differences Between Goods and Services
PowerPoint Slide: #2PowerPoint Slide: #1
3. Describe the marketing problems associated with inseparability and their possible solutions.
The marketing problems associated with inseparability are directly related to: (1)the service provider's face-to-face interactions with the customer; (2) thecustomer's involvement in the service delivery process; (3) the impact of "other customers" that are sharing the service experience with each other; and thedifficulty involved in the centralized mass production of services. Suggestedsolutions to minimize the impact of inseparability include: (1) the carefulselection and thorough training of public contact personnel; (2) a variety of strategies which may be used to manage customers to enhance their serviceexperience; and (3) the use of multi-site locations to increase the convenience of the service firm to the customer and to overcome the difficulties associated withcentralized mass production.
4. Explain the marketing problems associated with heterogeneity and their possible solutions.
The primary marketing problem associated with heterogeneity is thatstandardization and quality control are difficult for the service firm to provide on aregular basis. The chapter suggests that standardization may be achieved viaautomation--replacing human labor with machines. In contrast, many servicefirms are taking advantage of the variability that is inherent in service delivery byoffering customized services. The tradeoffs associated with customer preferences with standardization and customization include price, speed of delivery, and consistency of performance.
5. Identify the marketing problems associated with perishability and their possible solutions.
Due to the characteristic of perishability, it is not possible to inventory services.Due to the lack of an inventory, the only time that demand truly matches supplyin the service sector is by accident. Strategies utilized to minimize the impact of perishability include strategies to increase supply and/or alter demand.Strategies which increase the supply of service include utilizing part-timeemployees, sharing capacity with other service providers, making preparations inadvance with regards to future expansion, utilizing third-parties, and increasingthe amount of customer participation during the service process. Strategies toalter demand include developing creative pricing strategies, utilizing reservationsystems, developing complementary services, and developing nonpeak demand.
Chapter 2 Fundamental Differences Between Goods and Services
6. Consider the impact of intangibility, inseparability, heterogeneity, andperishability on marketing’s relationship to other functions within the serviceorganization.
Marketing plays a very different role in service-oriented organizations than itdoes in pure goods organizations. The concept of operations being responsiblefor producing the product and marketing being responsible for selling it, cannotwork in a service firm. The invisible and visible parts of the organization, thecontact personnel and the physical environment, the organization and itscustomers, and the customers themselves are all bound together by a complexseries of relationships. Consequently, the marketing department must maintaina much closer relationship with the rest of the service organization than iscustomary in many goods businesses.
Opening Vignette: GEICO and the Gecko
One company that has excelled in the insurance sector is GEICO. The companywas based on the idea that if it could lower costs by focusing on specific targetmarkets, the company could charge lower premiums and still be profitable.
Contributing to the company’s success has been the introduction of the GEICO“gecko”. The gecko with his English voice has become a recognizable tangiblesymbol and an advertising icon for the company.
Lecture Outline:
I.IntroductionA.Marketing educators felt the marketing of services was not significantlydifferent from the marketing of goods.B.However, specific differences are primarily attributed to four uniquecharacteristics intangibility, inseparability, heterogeneity, andperishability.II.Intangibility: The Mother of All Unique Differences
- a distinguishing characteristic of services that makes them unable to seen, felt,tasted, or touched in the same manner as physical goods.
Chapter 2 Fundamental Differences Between Goods and Services
PowerPoint Slide: #3

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