chapter 3 fundamental differences between goods and services
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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.
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Opening Vignette: Bed Wars
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• 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.
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• 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
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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
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Figure 3.2: Marketing Challenges and Solutions Pertaining to Inseparability
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Marketing Problems caused by Inseparability
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• 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
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• 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
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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
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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
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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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mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
Copyright © 2011 Cengage Learning.
©2011 Cengage Learning. All rights reserved.