Marketing Strategy: Differentiating Products and Services

Differences Between Products and Services and Marketing Plan Considerations

What are the major differences between products and services, and how must these differences be taken into consideration when preparing your marketing plan?

The Four Key Differences Between Products and Services

1. Intangibility

• While products are tangible, services are intangible (they cannot be touched or tested before purchase).
• Buyers look for evidence of quality by drawing inferences from the place, people, equipment, communication material, symbols, and price.
• Service marketers must transform intangible services into concrete benefits. This requires choosing strong brand elements (logos, symbols, characters, and slogans).
• All aspects of the service delivery process can be branded (e.g., the environment, reception area, and employee appearance).

2. Inseparability

• While products are produced, inventoried, and later consumed, services are typically produced and consumed simultaneously.
• Provider–client interaction is a special feature of services marketing.
• When a provider is highly preferred, they can manage demand by:
  • Raising prices to ration limited time.
  • Working with larger groups.
  • Working faster.
  • Training more service providers.

3. Variability

Services are variable; quality depends on who provides them, when and where, and to whom.

Buyers often consult others before selecting a service provider. Some providers offer guarantees to reduce customer perceived risk. To increase quality control, three steps are essential:

1. Invest in robust hiring and training procedures.
2. Standardize the service performance (often achieved using a service blueprint).
3. Monitor customer satisfaction (implementing suggestion and complaint systems alongside effective customer communications).

4. Perishability

Perishability becomes a problem when demand fluctuates (providers must carefully consider rush-hour demand).

Demand management is critical: the right services must be available to the right customers, at the right places, at the right times, and at the right prices to maximize profitability.

Strategies for Matching Service Demand and Supply

Demand Side Strategies:

• Differential pricing.
• Cultivating non-peak demand.
• Providing complementary services to offer alternatives to waiting customers.
• Implementing reservation systems.

Supply Side Strategies:

• Utilizing part-time employees during peak demand.
• Implementing peak-time efficiency routines.
• Increasing consumer participation (self-service).
• Sharing services.
• Ensuring facilities allow for future expansion.

Achieving Service Marketing Excellence

Service marketing excellence requires proficiency in three broad areas:

External Marketing

This describes the normal work of preparing, pricing, distributing, and promoting the service to customers.

Internal Marketing

This involves training and motivating employees to serve customers well. This is often considered the most important part of service marketing.

Interactive Marketing

This describes the employees’ skill in serving the client. Clients judge service not only by its technical quality (what is delivered) but also by its functional quality (how it is delivered).