DIFFERENCE IN GOODS AND SERVICES The most basic and universally cited, difference between goods and services

is intangibility. Because services are performances or actions rather than objects, they cannot be seen, felt, tasted or touched in the same manner that we can sense intangible goods. E.g., health care services are actions (surgery, diagnosis, examination and treatment) performers by providers and directed towards the patients and their families. The services cannot be actually seen or touched by the patients, although the patient may be able to see or touch the tangible components of the service (e.g. e uipment, hospital room) !ntangibility presents several mar"eting challenges# $ervices cannot be inventoried, and therefore fluctuations in demand are often difficult to manage. E.g. there is tremendous demand for resort accommodations in phoenix in %ebruary, but little demand in &uly. 'et the resort owners have the same number of rooms to sell year(round. $ervices cannot be patented legally, and new service concepts can therefore easily be copied by the competitors. $ervices cannot be readily displayed or easily communicated to the customers, so uality may be difficult for the consumers to assess. )ecisions about what to include in advertising and other promotional materials challenging, as is pricing. The actual cost of a *unit of service+ is hard to determine and the price( uality relationship is complex. ,eterogeneity# Because services are performances, fre uently produced by humans, no services will be precisely ali"e. ,eterogeneity also results because no two customers are precisely ali"e. each will have uni ue demands or experience the service in a uni ue way. Thus, the heterogeneity connected with services is largely the result of human interaction (between and among employees and customers) and all of the vagaries that accompany it. E.g. a tax accountant may provide a different service experience to two different customers on the same day depending upon their personal needs and personalities. Because services are heterogeneous across time, organi/ations and people, ensuring consistent service uality is important. 0uality actually depends on many factors that cannot be fully controlled by the service supplier, such as ability of consumer to articulate his needs, willingness 1

ability of the personnel to satisfy those needs, presence of other consumers and level of demand for the service. Simultaneous production and consumption 2hereas most goods are produced first, then sold and consumed, most services are sold first and then produced and consumed simultaneously. %or example, an automobile can be manufactured in )etroit, shipped to $an %rancisco, sold - months later and consumed over a period of years. But restaurant services cannot be provided until they have been sold, and the dining experience is essentially produced and consumed at the same time. This means that the customer is present while the service is being produced and thus his views are ta"en in the production process. Because services are often produced and consumed at the same time, mass production is difficult. The uality of service and customer satisfaction depends on the real time including actions of employees and interaction between employees and customers. !t is not possible to gain economies of scale through centrali/ation. !f the services are decentrali/ed they can be delivered to the consumer in convenient locations. 3s the customer is part of the production process, they affect the outcome of the service. 3 4problem5 employee can cause problems for themselves and for others in the service setting leading to lower level satisfaction. E.g. in a restaurant setting, an over demanding and intoxicated customer will command extra attention of service provider and negatively impact the experiences of other customers. 6erishability# 7efers to the fact that services cannot be saved, stored, resold or returned. 3 seat on an airplane or restaurant not used cannot be reclaimed or used or resold at a later time. )ue to this nature a service cannot be inventoried. )emand forecasting and creative planning for capacity utili/ation are therefore important. $ince services cannot typically be returned or resold it implies strong recovery strategies when things go wrong. E.g. a bad haircut cannot be returned, the customer should have strategies to recover the customers good will if and when such problems occur

8lassification of services# There are a number of ways in which services can be classified. $ome of them are mentioned here. 9. :n the basis of the END USER the services can be classified into following categories# 8onsumer # leisure, hairdressing, personal finance and pac"age holidays Business to Business# advertising agencies, printing, accountancy, 8onsultancy !ndustrial# 6lant ;aintenance and repair and hygiene, installation and project management. -. The DEGREE OF TANGIBILIT can be used to classify a service. ,ighly tangible# car rental, vending machines, telecommunications $ervice lin"ed to tangible goods# domestic appliance repair, car service. ,ighly tangible# psychotherapy, 8onsultancy, legal services. <. $ervices can be bro"en down into LABOR INTENSIVE !"EO"LE #ased$ and E%UI"&ENT #ased services. This can also be represented by degree of contact. 6eople based services# high contact # education, dental care, restaurants and medical services E uipment based# low contact# automatic car wash, launderette, vending machine, cinema. =. The E'"ERTISE and S(ILLS of the service provider can be bro"en down into the following categories# 6rofessional# medical services, legal services, accountancy, tutoring. >on 6rofessional# baby sitting, care ta"ing, and casual labor. ?. The overall BUSINESS ORIENTATION ! "ROFIT$ is a recogni/ed means of classifications# >ot for profit# The $couts 3ssociation, charities, and public sector leisure facilities.

 8ommercial# ban"s, airlines, tour operators, hotel and catering services 8hristopher @oveloc" gives another classification of services based on the customer involvement in production process# 6eople processing# tangible actions to people5s bodies, such as airline transportation, haircutting and surgery. 8ustomers need to be physically present throughout service delivery in order to receive the desired benefits of such services. !t is important to figure the process and output to identify the benefits created. 3lso some non( financial costs are to be identified A such as time, mental and physical effort and even tear and pain A that customers incur in obtaining these benefits. 6ossession 6rocessing# Tangible actions to goods and other physical possessions, such as air freight, lawn mowing, and janitorial services. !n these instances, the object re uiring processing must be present, but the customer need not be. ;ental $timulus 6rocessing# intangible actions directed at people5s mind, such as broadcasting and education. !n this instance the customers must be present mentally but can be located either in specific service facility or in a remote location connected by broadcast signals or telecommunication lin"ages. $ervices that interact with people5s mind have the power to shape attitudes and influence behavior. $o when the customer is in a position of dependency or there is a potential for manipulation, strong ethical standards and careful oversight is re uired. This type of service can easily be converted to digital bits or analog signals, recorded for prosperity, and transformed into a manufactured product, such as a compact disc, videotape, or audio cassette, which may then be pac"aged and mar"eted much li"e any other physical good !nformation 6rocessing# !ntangible actions directed at intangible assets, such as insurance, investment ban"ing, and 8onsulting. %or these services, no direct involvement with the customer may be needed, once the re uest for the service is initiated. $ervices highly dependent on effective collection and processing of information include financial services, accounting, and law, mar"eting research, management

consulting, medical diagnosis and a variety of other professional services. Tradition and a personal desire to meet the supplier than often determine the extent of customer involvement in such services more by the needs of operation process.

Reasons for growth in the service sector: ,ouseholds as well as firms are demanding more services as well as services of increasing uality and sophistication. There are number of reasons for this growth in the service sector as mentioned below# Breater affluence# 2ith the increasing affluence of people resulting from the growth of economies there has been a greater desire for 0uality life. 8onsumers are willing to spend more on leisure resulting in greater demand for recreation and entertainment facilities, tourist resorts and other hospitality services. 3lso, there has been a tendency on externali/ation of services production from households to the formal economy. )emand for services li"e interior decoration, laundry, care of household products etc. has increased which consumers used to perform themselves earlier. 3lso, with increased incomes, there has been a greater demand for financial services. 2or"ing women# 3s more and more women have started wor"ing, the time has become most scarce commodity in family life. This has led to more demand for crCches, baby sitting, household domestic help etc. %urther, wor"ing women and the resulting two income households have created greater demand for, certain services li"e retailing, real estate and personal finance services Breater life expectancy# The economic growth and increasing standard of living have also resulted in the greater life expectancy and there by an expanding old age population. Thus there is an increased need for services li"e old age homes, nursing homes, healthcare centers, etc. Breater complexity of products# 2ith rapid development in technology, the consumer today uses a lot of complex products in his day to day life. Thus there is a greater demand for specialists who provide maintenance and up"eep of such products li"e cars, home computers, household appliances etc. !ncreased complexity of life# The greater complexity of life has created demand for a wide range of services, especially legal and financial advice. The number of specialists in

income tax, labor laws, legal affairs, marriage counseling, employment services etc. has been increasing. Blobali/ation Blobali/ation of economies has led to an increased demand of communication, travel and information services. 3lso there has been an increased and new demand on legal and other professional services. 2hile the role of agriculture gas been reducing in the economies of industrial societies, that of service sector ahs been increasing at a fast pace. Thus, as the economies shift from developing to developed economies the, they show more and more shift towards services.

%or a mar"et offer, which is primarily intangible, managing uality is a major issue. !n the manufacturing sector, uality is a major issue. !n the manufacturing sector, the uality of a physical product can be chec"ed before it is ta"en to the mar"et. ,owever, in case of service organi/ations, the uality is more of *perception+ of the intangible mar"et offer. $ervice uality is a subjective assessment that the customers arrive at by comparing the service level they believe an organi/ation ought to deliver to the service level they perceive is being delivered. Therefore, to compete successfully, service firms must develop uality to their service. This service uality is measured on two levels# Technical 0uality# The overall efficiency with which a ban" handles its customer accounts in terms of prompt statements, rate of interest offered and so on. %unctional 0uality# the way the service is actually delivered. this includes personal courtesy, the service environment in terms of comfort and dDcor, the customers own role (are there long ueues, are pens and forms provided to ma"e the entire transaction simplerE) ,owever, functional uality is the more important aspect of perceived service than technical uality. Therefore, essence of effectiveness in managing services lies in improving the functional uality of a firm5s service by managing the buyer(seller interaction (interactive mar"eting) as compared to traditional mar"eting activities. ;anaging the perceived uality of a service means that one has to match the expected service and the perceived service to each other so that consumer satisfaction is achieved. To "eep the gap between expected 1 perceived service minimal, two things are critical. %irst the promises about how the service will perform must not be unrealistic when compared to the service the customer will eventually perceive. $econdly it is necessary to understand how the technical 1 functional uality of a service is influenced and how the consumers perceive these uality dimensions. 8onsumer5s uality perceptions are influenced by a series of five distinct gaps occurring in organi/ations# Bap9# difference between consumer expectations and management expectation of consumer expectations.

Bap-# difference between management perception of consumer expectations and service uality specifications. Bap<# difference between service uality specifications and service actually delivered. Bap=# difference between service delivery and what is communicated about the service to consumers. Bap?# difference between the perceived service and expected service. This gap depends on the si/e and direction of the first four gaps associated with the delivery of service uality. The service uality can be measured on the following five dimensions which also help you close the above ? uality gaps# 7eliability# the ability to perform the promised service dependably and accurately. Tangibles# the appearance of physical facilities e uipment, personnel and communication materials. 7esponsiveness# the willingness to help the customers and provide prompt service 3ssurance# the "nowledge and courtesy of the employees and their ability to convey trust and confidence. Empathy# the caring, individuali/ed attention provided to the customer.

6roductivity is defined as the ratio of the output of a production process to an aggregate value of inputs. This concept of productivity involves around two basic assumptions. %irst, the factors of output are perfectly defined so that they can be measured and second, the utility of output is not uestioned. 8owell has suggested ways for improving productivity which include improving staff performance through training, introduction of technology into the system, reducing service levels, substituting products for services, using customers in service production and reducing the mismatch between supply and demand. Impro)in* Sta++ "er+ormance t,rou*, trainin*The staff in contact with the customers provides a visible element of the service. They should be trained to provide better service not only through hard wor" but also with s"ills this would result better productivity and also higher customer satisfaction. Introducin* S.stems and Tec,nolo*.%or industriali/ation of services, technology can be applied in three ways. %irst, is the hard technology, which implies substituting machinery for people (e.g. airport surveillance of baggage with F(ray e uipment)E The second called the soft technology, which implies substituting pre( programmed systems for individual service operations. (E.g., fast food operations). The third, hybrid technology that implies combining the above two, i.e., e uipment with planned systems to gain greater order, speed and efficiency. 6arsuraman created a three(stage model of external, internal and interactive mar"eting where introduction of technology as a service delivery option adds a whole new dimension. By putting existing technologies, labor force and capital stoc" into wor", the productivity growth rate can be increased considerably. Reducin* Ser)ice Le)els6roductivity can be reduced by reducing the uality of the service (E.g., a doctor can give less time to a patient and the preliminary investigations or history can be documented by a junior doctor). 3 proper balance should be maintained between uality and uality of service delivered. Su#stitutin* "roducts +or Ser)ices or Addin* Ne/ Ser)ices :ne can increase productivity by increasing the number of services. %or example, )epartment of post introduced courier service and followed by

introducing the non( document courier service thus adding to their services. 3 hotel can add parties and marriages to their ban uet services to introduce productivity. Customer Interaction!nvolving the customer in the service delivery process in the place of your own employees can enhance the productivity. E.g., a self(service restaurant. ,owever consumers can constraint and can become a barrier to productivity. Therefore productivity related changes must be identified and implemented from the consumer5s viewpoint. The customer insensitivity can be avoided by# %irst, by developing customer trust in the productivity related changes through a systematic and planned communication program. $econd, understanding customer habits and determinants of consumer behavior. Third, pre(testing new procedures and technology before commercially introducing the same. %ourth, educating customers about how to use innovations. 6roductivity improvement is not a static process but a dynamic, which occurs over time. Therefore it is necessary to monitor and evaluate performance periodically. Reduce &ismatc, #et/een Suppl. and Demand The concept of $ycro(mar"eting is used to manage demand and supply. $asser suggested some basic to alter demand so as to fit it within the available capacity. !n such situations where capacity is restricted, the four strategic options are as follows# 9. -. <. =. )eveloping off pea" pricing schemes >on pea" promotion and demand creation )eveloping complementary services 8reation of reservation system

)eveloping off pea" pricing schemes will help in shifting the demand from pea" periods to non(pea" periods. 7esorts and hotels offer off(season pac"ages to shift demand from pea" to non( pea" seasons. )eveloping complementary or facilitating services not only attracts customers away from bottle nec" operations at pea" times but might also provide an alternative service while they are in ueue for capacity related

operations. %or e.g. at a casino, a lounge with wide screen television or a bar will shift some tourists from restricted capacity service operations. $uch a strategy wouldn5t only give additional value but also an opportunity to differentiate the service offer from the competitors. The reservation strategy would also help in managing demand and thus, customer satisfaction e.g. reservation of cinema tic"ets in advance. ;anaging capacity and controlling the supply side can be done in the following manner# Gsing part time employees# Employing part time employees is one of the solutions to increase capacity. 3t a resort hotel, local students are engaged at pea" seasons to cater to the customers. !ncreasing efficiency of existing personnel involving customers# Training can increase the efficiency of an employee. By training the staff in multiple functions, most employees can be engaged in essential tas"s of delivering the service during pea" hours and the support tas"s are deferred to slac" periods The third method is that consumers participate in delivery of service and, thereby, lower labor re uirements of the producer. E.g. .$elf service restaurant The fourth method is that of sharing capacity with others rather than creating capacity in(house. E.g. 7estaurants are selling branded ice creams rather than investing in ice cream ma"ing facilities in( house. @astly the capacity can be increased by investing in expansions so as to cater to the increase in demand. 3lthough productivity will result in better profitability, uality should not be affected. 3 proper balance has to be maintained between productivity, standardi/ed uality and customers