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Chapter 2
Fundamental 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: GEICO
• Contributing to the company’s 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.
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Intangibility
• 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
VS.
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• Lack of service inventories
• Not protected by patents
• Not easily displayed or communicated
• Pricing is difficult
Marketing Problems caused by Intangibility
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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
•Create a strong organizational image
Possible Solutions for Intangibility
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Table 2.1: Intangibility
Marketing Problems Possible SolutionsLack of service inventories
Use of tangible clues
Lack of patent protection
Use of personal sources of information
Difficulty in displaying or communicating services
Creation of a strong organizational image
Difficulty in pricing strategies
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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
Marketing Problems caused by Inseparability
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• 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
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?
Customer is involved in the production process
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• Selecting and training public contact personnel
• Develop strategies to manage consumers
• Develop multi-site locations
Possible Solutions for Inseparability
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Table 2.2: Inseparability
Marketing Problems Possible SolutionsPhysical 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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• Standardization and quality control are difficult to achieve
Marketing Problems caused by Heterogeneity
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• Customization•Constructed to fit
customer’s exact needs
• Standardization•Faster•Less expensive•More consistent
Possible Solutions for Heterogeneity
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Table 2.3: Heterogeneity
Marketing Problems Possible SolutionsDifficult to standardize service and quality control
Customization
Standardization
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• 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
Marketing Problems caused by Perishability
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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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• Utilize part-time employees• Share capacity• Prepare in advance for expansion• Utilize third-parties
Possible Solutions for PerishabilitySupply Strategies
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Table 2.4: Perishability
Marketing Problems Possible SolutionsHigher demand than maximum available supply
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