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Chapter 2

Fundamental
Differences Between
Goods and Services
2006 Thomson Learning, Inc. Sout

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 marketings relationship to other functions
within the service organization.

2006 Thomson Learning, Inc. Sout

Opening Vignette: GEICO


Contributing to the
companys success
has been the
introduction of the
GEICO gecko. The
gecko with his English
voice has become a
recognizable tangible
symbol and an
advertising icon for
the company.

2006 Thomson Learning, Inc. Sout

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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Marketing Problems
caused by Intangibility
Lack of service
inventories
Not protected
by patents
Not easily
displayed or
communicated
Pricing is
difficult

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Possible Solutions for


Intangibility
Use tangible clues/physical evidence
Quality furniture in a lawyers office
Appearance of the personnel

Utilize personal sources of


information
Create a strong organizational
image

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Table 2.1: Intangibility


Marketing Problems
Lack of service
inventories

Possible Solutions
Use of tangible clues

Lack of patent
protection

Use of personal
sources of
information

Difficulty in displaying Creation of a strong


or communicating
organizational image
services
Difficulty in pricing
strategies
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Marketing Problems
caused by Inseparability
Service provider is involved in
the production process
Customer is involved in the p
roduction process
Other customers are involved in
the production process (shared
experience)
The mass production of services
presents special challenges
2006 Thomson Learning, Inc. Sout

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 customers
presence in mind

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

2006 Thomson Learning, Inc. Sout

Table 2.2: Inseparability


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

Consumer
management

Involvement of other
customers in the
production process

Use of multisite
location

Special challenges in
mass production of
services
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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
Constructed to fit
customers exact
needs
Standardization
Faster
Less expensive
More consistent

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Table 2.3: Heterogeneity


Marketing Problems
Difficult to
standardize service
and quality control

Possible Solutions
Customization

Standardization

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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
Demand Strategies

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

2006 Thomson Learning, Inc. Sout

Possible Solutions for


Perishability
Supply Strategies
Utilize part-time employees
Share capacity
Prepare in advance for expansion
Utilize third-parties

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Table 2.4: Perishability


Marketing Problems
Higher demand than
maximum available
supply

Possible Solutions
Demand strategy:
Creative pricing
Reservation
systems

Higher demand than


optimal supply level

Development of
complementary
services

Lower demand than


optimal supply level

Development of
nonpeak demand

Demand and supply


and optimal levels

All 5 Supply
strategies

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The Role of Marketing in


the Service Firm
Different functions are interwoven
Marketing must maintain closer
relationships with other departments
Marketing, operations, and human
resources should work together.

2006 Thomson Learning, Inc. Sout