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.
©2006 Thomson Learning, Inc. South-Western
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.
©2006 Thomson Learning, Inc. South-Western
Intangibility
VS.
• Pick up the shoes
• Feel the quality of
materials • Entitles the
• View specific style consumer to an
and color experience
• Sample the fit • 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 lawyer’s office
• Appearance of the personnel
• Utilize personal sources of
information
• Create a strong organizational
image
©2006 Thomson Learning, Inc. South-Western
Table 2.1: Intangibility
Marketing Problems Possible Solutions
Lack of service Use of tangible clues
inventories
Lack of patent protection Use of personal sources
of information
Difficulty in displaying or Creation of a strong
communicating services organizational image
Difficulty in pricing
strategies
©2006 Thomson Learning, Inc. South-Western
Marketing Problems caused
by Inseparability
• Service provider is involved in the
production process
• Customer is involved in the prod
uction process
• Other customers are involved in the
production process (shared
experience)
• The mass production of services
presents special challenges
©2006 Thomson Learning, Inc. South-Western
Customer is involved in the
production process
• involvement may vary If given the choice of
• impact on the type of dining at one of two
service desired new restaurants,
• cycle of service would you select a
demand restaurant that had
• length of the delivery no cars in the
process parking lot, or
• service factory must would you choose a
be built with the restaurant down the
customer’s presence street with a full
in mind 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
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Table 2.2: Inseparability
Marketing Problems Possible Solutions
Physical connection of the Selecting and training
service provide to the public contact personnel
service
Involvement of the Consumer management
customer in the production
process
Involvement of other Use of multisite location
customers in the production
process
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
customer’s exact needs
• Standardization
• Faster
• Less expensive
• More consistent
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Table 2.3: Heterogeneity
Marketing Problems Possible Solutions
Difficult to standardize Customization
service and quality
control
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
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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 Possible Solutions
Higher demand than Demand strategy:
maximum available Creative pricing
supply Reservation systems
Higher demand than Development of
optimal supply level complementary services
Lower demand than Development of
optimal supply level nonpeak demand
Demand and supply and All 5 Supply strategies
optimal levels
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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.
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