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8.4. Services Marketing

Products can also be divided into physical products and services. For many marketers, the difference between services marketing and the marketing of physical goods is negligible. This is for the following reasons:

The marketer's definition of a product as being a bundle of benefits. An individual seeking to be cheered up may achieve this by going to a good movie (a service) or by buying a new shirt (a physical product). The benefit is basically the same.
Difficulties of definition. Most physical goods contain a service aspect, and most services contain a physical product. In other words, most products lie somewhere along a continuum between purely service and purely physical products.
Consumer orientation means that we should be looking at what the consumer thinks, needs and wants, not at defining our product in terms of its characteristics. Having said that, there are clearly products where the service element is the major part of the cost of the product: for example, a restaurant meal. Here the cost of the raw materials (the ingredients of the food served) is only a tiny part of the overall cost of the meal. Agourmet dinner costing a week’s wages may have been made from ingredients costing a tenth of the final bill; the diner is paying for the skill of the chef, the time and efforts of the waiters, and the pleasure of dining in luxurious surroundings (not to mention not having to do the washing-up).

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The main differences between service products and physical goods are following -

Services are intangible - An insurance policy is more than the paper it is written on; the key benefit (peace of mind) cannot be touched.
Production and consumption often occur at virtually the same time A stage play is acted out at the same time as the consumer enjoys the performance.
Services are perishable An airline seat is extremely perishable; once the Aeroplane takes off, the seat cannot be sold. Services cannot be produced in advance and stockpiled.
Services cannot be tried out before buying It is not usually possible to try out a haircut before agreeing to have it done, nor will most restaurants allow customers to eat the meal before deciding whether to order it.
Services are variable even from the same supplier, Sometimes the chef has a bad day, or the waiter is in a bad mood; on the other hand, sometimes the hairdresser has a flash of inspiration that transforms the client's appearance.

From the consumer's viewpoint, the risk attached to buying a service will inevitably be higher than is the risk of buying a physical product. Physical products are easily returned if they fail to satisfy; it is impossible to return a poor haircut, and unless the standard is very poor, it may even be difficult to avoid paying for it. Even a minor defect in a personal stereo can justify returning the item; an uncomfortable tram ride with a rude conductor will not result in a refund of the fare. The result of this is that consumers are likely to spend more time on information-gathering, and will rely more heavily on word-of-mouth recommendations than they would when buying a physical product. For professional services, consumer is likely to examine the credentials and experience of the service provider.

Service purchasing follows a slightly different sequence from purchase of a physical good.

Most of the risk attached to buying a physical product is limited to the purchase price (though no doubt there will be exceptions to this general rule). Services carry additional risks.

Consequential losses arise when a service goes wrong and causes a loss to the customer. For example, a poorly handled legal case could result in the loss of thousands of pounds, or even loss of liberty in a criminal case. Service providers usually are careful to explain the risks beforehand, use disclaimers in contracts, and carry professional liability insurance. Consumers can sue for consequential losses.
Purchase price risk is the possible loss of the purchase price when the consumer buys a service that does not work. The usual consumer response is to refuse to pay for the service, so it is advisable for the supplier to check during the service process that everything is satisfactory.
Misunderstanding is common in service provision because of inability to try out services (trialability). Particularly in professional services the provider may feel that the customer would not understand the finer details of what is being done, and may therefore not bother to explain properly. This can easily result in post-purchase dissonance and refusal to pay. Because consumers are buying a promise, they are more likely to use indirect measures of quality such as price. Diners tend to assume that more expensive restaurants will provide better food and/or service; that expensive hairdressers will provide better hairdos; and that expensive lawyers are more likely to win cases. Having made a purchasing decision, the consumer is more likely to become involved with the service provider. Consumers therefore tend to have favourite restaurants, hairdressers and family solicitors with whom the relationship might continue for a lifetime.

In services markets there is more emphasis on Booms and Bitner's additional three Ps: people, process and physical evidence.

People - Because most services involve direct contact between the producer and the consumer, the attitude and behaviour of the people involved are an integral part of the product: a hairdresser's personality affects trade in a way that the personality of a production- line worker does not.
Process - Since the consumer is usually present during all or part of the process of providing the service, process becomes as important as outcomes in a service market.
Physical evidencegives the consumer something to refer to and to show other people if necessary. Since service products are usually intangible, the consumer of (say) an insurance policy will need some written evidence of its existence in order to feel confident in the product. In many ways services can be marketed in similar ways to physical products. In most cases there is no clear demarcation between physical products and services, so the techniques for marketing them will not differ greatly.

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