The MAANZ MXpress Program
Understanding the Service Product
Dr Brian Monger
Copyright July 2013.
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Dr. Brian Monger
• Brian Monger is the CEO of MAANZ International and a
Professional marketer and consultant with over 45 years
Marketing In Black and White 3
Services Marketing: Understanding the
• It has been suggested that the traditional marketing distinctions made
between goods and services may not be helpful for marketing purposes.
• Ultimately all products are bought or used to solve problems and provide
customer benefits. Also all products are composed of tangible and
• The distinction between goods and services is blurred.
• However organisations which market products where the intangible
elements are more obviously dominant in the make‐up of the product,
may have special problems in adapting marketing ideas and practices.
A Reminder ‐ What is Marketing About?
• The marketing concept may appear in different guises ‐ some
simple, some complex; but it is essentially about the following
few things which contribute towards an organisation's
• (a) To obtain its own objectives, an organisation has to create
a value proposition that will win and a customer. The
customer should be central to everything the organisation
(b) To win and to keep a customer the organisation has to
create, produce and deliver goods and services that their
target market wants and values. Such products should be
created, produced and delivered under conditions that are
relatively attractive to customers compared with those
offered by competitors.
A Reminder ‐ What is Marketing About?
(c) To continue to do these things the organisation must
generate revenue which exceeds costs and which is of
sufficient size and which arises with sufficient regularity to
attract, keep and develop capital for the organisation and to
keep, at least abreast and, sometimes ahead of, competitive
• In essence then, marketing is an attitude of mind; it is a way
of organising the enterprise; it is a range of activities which
will employ tools and techniques in the process of identifying,
anticipating and satisfying customer requirements.
The Importance of Service
• The statement 'Service is everybody's business' is a marketing truism. Even
highly tangible products have intangible elements that enhance consumer
satisfaction with the sale. Therefore, all marketers need to manage
services. Every organisation faces service competition.
• Service is the essence of value.
• Services marketing is used to market any product (goods or
• All organisational results focus on successful marketing activities.
• While all the business elements listed above are important, without a
market, without someone to sell to or exchange with, there can be no
Service and Customers
• The major purpose of any business activity – regardless of
whether it is situated in the consumer, B2B, services, social or
not for profit sectors – is to acquire and keep customers
through the exchange process by continually fulfilling
customer needs and wants.
• Perhaps ‐ A Marketed Service ‐A market transaction by an
individual or organisation where the primary object of the
transaction is focused on the non tangible aspects of the
product (Monger B Services Marketing Notes MAANZ 1997)
• Evert Gummeson (1987) defines services as anything that
cannot be dropped on your foot.
The Early Stage of Services Marketing ‐ Differentiating between Products
(goods) and Services
• One of the earliest and probably the leading papers to be written on this
topic was by G Lyn Shostack The best known of which is "Breaking free
from product marketing",(1977) Journal of Marketing, Vol 41 (April ), pp
73 ‐ 80.
• The Shostack’s article talks about the nature of services and is one of the
first academic papers to argue that services are relatively intangible and
that it is this intangibility that differentiates services from goods.
• Shostack may have been the first of the numerous writers who have
suggested that the offers of services marketers differed from the
marketers of tangible goods in the following key ways:
• Strictly speaking, a service is of course intangible. Services
have no form and are therefore intangible. The problem for
Shostack and other similar writers arises however, was that
few products (goods) were completely tangible and few
services could be seen as completely intangible.
• The Product‐Service continuum was first published in 1977
and has been widely and fairly exclusively used since that
time. The theory, which supports the tangibility continuum, is
such that there can be a perfectly intangible service and a
perfectly intangible service ‐ all products having greater or
lesser degrees of intangibility.
A Mixture of Both
Product Service Continuum
• The general thought, particularly back in the 70's was that
services (being person created) must be produced and
consumed at the same time and as such both the consumer
and the service provider have to be present at the same time
for the service to be performed and experienced.
• Often the simultaneous presence of the producer and the
consumer will mean that a direct sale is often the only form of
• Most services were thought incapable of being mass
produced in the way that many goods are such as bottled soft
drink is, so the operation of many service providers tended to
be thought of as limited in scale.
Heterogeneity ‐ Variability
• Whereas the processes involved in the manufacture of goods
can be closely checked and controlled to ensure consistent
quality, the monitoring of processes involved in the
production of services cannot ensure that services are
delivered at the same level of quality on a consistent basis.
• It was considered extremely difficult to achieve a standardised
output with services because the processes of services
generally comprise the involvement of people – the service
provider and the consumer.
• It appeared obvious that physical products can be stored and
stockpiled, whilst intangible services could not.
• An unsold hotel room can not be put back into stock the
following day if it fails to sell. When the night is over so too is
the opportunity to sell that room.
• It is suggested that the lack of the physical prevents actual
ownership because a customer may only have access to or use
of a service, like say a facility e.g. a hotel room or a credit card
or an accounting service and does not get permanent
Are they Different?
• There is a significant body of literature to support the premise
that "products and services“ (actually as economics says ‐ the
term product includes both goods and services ‐ it is only
marketers who got the terms consistently wrong) are
• These notional differences are persistently identified in light
of the previous list of characteristics of services. The writers
concentrating on the marketing of services continue to
suggest that marketers have to look at services differently and
as such the development the marketing strategy will be quite
unique and different from the marketing strategy of goods.
Are Services Really Different?
• Shostack and others argued that services' marketing requires
a totally different approach and different concepts compared
with goods' marketing.
Are Services Really Different?
• From a perspective of simple logic it is hard to understand
how any product could exist without a combination of both
tangibles (goods) and intangibles (labour and services).
• The concept that salt is pure good (product) does not address
the numerous value adding service activities (such as
marketing ‐ packaging, labelling, distribution, branding,
promotion) that are required to offer it as a saleable product.
• The same is true of a "pure service" like the haircut which
requires goods and other tangibles (scissors, salon
hairdresser) to the make the service available. How could a
service actually be exchanged without some form of
The Alternative View
• More recent writers (for example Christian Gronroos and Edvard
Gummerson) question the validity and practicality of the previous
attempts at goods/services differentiation.
• Christian Gronroos 1989 believes that traditional perspective of services
marketing has little to offer organisations even in the service sector and
that the view of services as something provided only by a certain type of
organisation is probably an outdated one, which limits understanding and
usefulness. It gives the wrong signal about the importance of services in
all situations and about the impact of services competitiveness.
• Edvard Gummerson states “there is no practical advantage in continuing
to try to define services in a separate way”
• I suggested back in 1995 that all products are essentially
services which use tangibles to affect the delivery of value.
(Monger1995). I have found no reason to alter that view
• The main benefits (from a buyer/user perspective) of any
product are the intangible ones ‐ services the product
provides or services attached to the product.
• These provide the satisfaction and value sought in the
• Basically what the tangible product factors provide is the
vehicle for the intangible satisfactions to be delivered and
provide value to the buyer.
All Products Are Largely Service
(Intangible Value) Based
• It seems logical that services are not something distinctly different or
separate from a product or a different class of products. Customers do
not buy a product or a service ‐ (goods or services); they buy the entire
value proposition the (mostly intangible) benefits all products provide
them with.' They buy offerings consisting of goods, services, information,
image, personal attention and other components.
• In the final analysis organisations always offer a service to customers,
regardless of what they produce. (Gronroos 2000)
• The value of goods and services to customers is produced both in factories
and in the back offices of service organisations, in service delivery
encounters as well as when users make use of the product they have
Another Look at the Standard List ‐ Which
attempts to differentiate services
• The List:
Intangibility ‐ 'Services lack
• The idea is that services are essentially intangible. It is not possible to
taste, feel, see, hear or smell services before they are purchased. Services
do not cast a shadow.
• If the core of any offering is a service, then it is reasonable to suggest that
it will be difficult to sell because in being intangible, it can only be
imagined. With all service products, there must always be tangible things
associated to carry and represent the service, such as a credit card, an
insurance policy, people and/or premises.
Intangibility ‐ 'Services lack
• Christian Gronroos even suggests that goods are not really
tangibles, in the perceptions of customers. Products such as
tomatoes or a car are always primarily perceived in subjective
and intangible ways and in terms of the services they will
provide (its not just a car or a tomato). If a restaurant provides
a service is it so different to a can of precooked food? Hence,
the intangibility characteristic does not distinguish services
from physical goods as clearly as is usually stated in the
literature. Some products are harder to understand than
Inseparability‐ 'Services are only available
directly from the provider'
• It is suggested that Services cannot be separated from the
person of the provider. A corollary of this is that creating or
performing the service may only occur at the same time as
full or partial consumption of it (production and consumption
must be simultaneous). It is suggested that goods are
produced, sold and then consumed whereas services are sold
and then produced and consumed.
• Of course some services are time specific and cannot be
stored (an airline flight). Others like teaching and
entertainment can be fully or partially stored ‐ for example by
recording ‐ video tapes/DVDs even books and therefore can
be separated. Banking services are in part now stored by an
Heterogeneity ‐ 'Services lack consistency'
• Services are often described as being heterogeneous ‐ that is being variable or not
having consistency or being capable of standardisation of output. This would be
explained as a service provided to one customer not being exactly the same as the
same service to the next customer. The lack of homogeneity (sameness) of
services can create problems in service management in how to maintain an evenly
perceived quality of the services produced and rendered to customers. It is often
difficult to achieve standardisation of output in services.
• This concept of course only applies to people produced services and forgets the
fact that many services are now provided by a range of technologies ‐ for example
ATM's, vending machines as well as the internet and via computer software The
key aspect of such services being delivered, that they are heterogeneous. A
machine could not do anything but deliver the same service.
• Highly standardised human delivered services are also possible. At McDonald's
and a range of service providers, customers receive almost exactly the same
Perishability ‐ 'Services cannot be stored'
• Most texts state that Services are perishable and cannot be
stored. This directly links with what was said in the last two
• While some services are perishable many services are not and
can be stored. Service as software is an example where the
original activity is stored and used many times. There are
degrees of perishability in all value offers
Ownership ‐ 'Services cannot be owned'
• Many writers have suggested that lack of physical ownership
is a basic difference between a service industry and a goods
industry because a customer may only have access to or use
of a service, like say a facility e.g. a hotel room or a credit card
not permanent ownership. They suggest payment is for the
use of, access to or hire of items. With the sale of a tangible
good, the buyer has possession and full use of the product.
• This really points out the fundamental difference in approach
between the style adopted by previous writers and the more
• Does value acquisition (ownership) actually require physical possession?
Is the only form of value to be found in physical possession? Not really.
Value is a perceptual factor. People pay for the value they perceive they
will get from an exchange, even if they cannot touch the resultant product
of that exchange. A very good example is people who give money to
charity. They mostly do so to feel better to have a sense of making a
contribution to a better world. They do not receive anything much more
than a good feeling. This is much the same as one looks for in purchasing
anything ‐ from a car to an accounting service. Lack of actual ownership is
not limited to services either. Obviously the hire of car provides
ownership like benefits as well.
Products represent the Benefits People Buy
• Of course the list does suggest some things that are worth
thinking about. But they are simply not enough to manage
the Marketing of Services in a totally different way
• Ultimately all products are bought or used to solve problems
and provide customer benefits. Also all products are
composed of both tangible and intangible elements.
Services are Co‐created
• Another suggested feature of a service is that the value
derived is often dependent upon the skills, knowledge and
participation of the buyer as of the seller.
• Services are indeed very often relational. A service encounter,
for example where a customer is a restaurant guest or makes
a telephone call, is a process.
• In this process the service provider is undertaking a form,
interaction with the customer. A customers interaction with a
good is also an activity ‐ a service (spaghetti needs cooking to
realise its full value).
But ‐ Is There Always a Direct Interaction?
• There are situations where the customer does not interact
with the service provider organisation. For example, a
plumber goes into an apartment to fix a leak when the tenant
is out; there are no immediate interactions between the
plumber, his physical resources or systems of operating and
• However, in all cases the service process does lead to some
form of co‐operation between customer and service provider.
Some form relationship must emerge.
Interaction Creates Value With All Products
• One of the reasons that understanding service marketing is of
interest to producers and sellers of tangible goods is that
customers are now more often involved in various processes
of the manufacturer such as the design of goods, modular
production, delivery, maintenance, helpdesk functions,
information share and a host of other processes which in
today's competitive environment have become important for
the creation of a competitive advantage. All these activities
bring the manufacturing of goods and service management
closer to each other.
A Greater Need to Manage Demand
• Of course some of the older differentiating factors on the list do apply to
• Some types of organisations find it difficult if not impossible to store their
service product to meet fluctuations in demand. There may be no simple
manufacturing changes that can be used to adapt supply of the services to
• Often, therefore, services organisations are concerned with managing
demand. Indeed, where demand for the services provided is excessive, a
strategy of demarketing' may be pursued where organisations may
actively discourage customers on a permanent or a temporary basis.
• Other strategies may seek to synchronise supply and demand to even out
irregularities in supply and demand by offering discounts for off peak use
(electricity and airlines flights for example).
Service Reputation May Be Individually
• Where the basis of the product provided is by one person, the
value of the service may be based on the reputation of that
• This also applies to services that produce tailored goods (a
photograph, a suit or a sculpture)
Many (Inseparable) Services Cannot be
Returned to the Provider
• Except where the product was provided in a stored form (and
even then there may be problem with services like software),
buyers cannot return services (e.g. a haircut)
Non warranty repairs
Views of Services
Services are Performed (Not produced)
• Services are performed; they are not produced. From serving at table, to
making a plea in court, in the sense that the service is a deed being
conducted (for the customer) at a given moment in time, it is all a
• The often 'real time' nature of the performance also means that a service
is highly flexible.
• At best it can be tailored to suit the particular customer being served.
• At worst there is the danger of a wide variation in delivery leading to
difficulties in quality control and also lack of a consistent identity across
service deliverers and outlets.
• The service marketer must manage this variability to advantage via the
use of performance standards and evaluation systems.
No Resale Value (No second‐hand market)
• There is 'futures value' only, but very little 'residual value' (if
any) in a service.
• A barrister's advice to a client is situation specific and could
not, with confidence, be sold to another person by that client.
Enabling (The prime function of any
• A service will enable the customer to obtain the benefits they
• Where the service is used to add value to a good, this
'enabling' may often be the main way in which the benefits
are provided, for example, a personal computer for the home
office is just a hunk of metal, silicone and plastic without the
installation, training and hotline support most people need.
• All products (goods or services) enable benefits to be
obtained, this is not unique to services.. Enablement is the
services' raison d'etre, a fact frequently forgotten.
Inter‐customer Influence (Who else is
being served by that provider?)
• The prospect may not be able to sample a service but they
can talk to people who have (and have experienced delivery
of) any of the above examples. They can thus discover if these
customers were satisfied and form an opinion of how likely it
is that they too will be satisfied.
• Some types of service are delivered in a social context.
• For these the management of how one customer may be
affected by, or may affect other customers, is an important
aspect for the service marketer to manage.
The Intellectual‐Operational Service Spectrum
Similar to the Products‐Services Continuum and
probably more useful is the 'Services Spectrum' shown below.
Intellectual Skills and
Objective Focus Subjective Focus
The Balance Between Manual Skills vs.
• At the bottom left of the spectrum, the service is dominated
by physical and operational skills, it is mainly the
performance of a manual skill of some kind, cooking, serving
at table, chiropody etc. This is not to say that there are no
intellectual skills involved, but these are in support of the
manual task which is physical.
• Whilst at the top right of the spectrum the situation is
reversed. The service is mainly about what the practitioner
knows, their intellectual property.
• Though many practitioners at this end of the spectrum are in
the 'Professions', significant manual skills may be involved,
such as in: surgery,
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Marketing In Black and White 46