This document discusses the key differences between marketing goods versus marketing services. For services, operations and marketing are highly integrated since services are produced and consumed simultaneously. The five major differences outlined are: 1) Tangibility of output, 2) Organizational features, 3) Ownership/consumption, 4) Scope of marketing activities, and 5) Role of the consumer. Quality is evaluated based on search, experience, and credence attributes. The service-profit chain links customer satisfaction and loyalty to employee satisfaction and productivity. Reasons for customer switching include pricing, inconvenience, service failures, employee response, and ethical problems.

1. Positioning of Marketing of
Services
Why integration of marketing and
operations?

2. In a goods mfg. company
• Operations designs, manufactures and
ships to warehouses or retails
• Marketing takes over to carry out sales,
collections, promotion and advertisement.
Marketing becomes a link between the
Operations and the customers
Operations and Marketing well defined
functions. Both do not interact frequently
and seldom before customers

3. In Services
• Operations carry out service design,
processes, delivers.
• Marketing is limited to promotion and
advertising
Operations is core function. There is heavy
overlap and a high need of coordination
and cooperation and hence integration

4. Basic difference
• Most Goods are first produced, then sold
and then consumed
• Most services are first sold, then produced
and consumed simultaneously
Production of service (operations issue),
consumption (marketing issue) are
inseparable, are integrated and change
the role of marketing in a firm

5. Five major differences in Goods
and Services Marketing
1. Output Tangibility:
• In goods marketing attempts to enhance
abstract association (youth for coke,
nutritious food)
• In services opposite strategy is needed
(umbrella for insurance, blanket
protection)

6. Five major differences in Goods and
Services Marketing
2. Organizational features: Services marketing
has two components:
• Service interface marketing: It is predominant in
personal services. These are small, high contact
firms that is impersonal or mass service.
Marketing is small or non-existent
• Functional marketing: It is predominant for
impersonal services as also for manufacturing
firms where large, low contact is needed.
Marketing is formal and well established

7. Five major differences in Goods and
Services Marketing
3. Ownership, Use and Consumption:
• As against goods, services are not
owned; services are used/consumed for
limited time.
• Focus of marketing is on service itself ( not
on selling of perfume but on fantasy)

8. Five major differences in Goods and
Services Marketing
4. Scope of marketing activities:
• Traditionally, 4 P’s of Product, Price, Place
and Promotion are considered in goods
oriented marketing
• Services marketing includes additionally
Participants (employees and customers)
Physical evidence (building, uniforms)
Processes (procedures, flow of activities in
providing service)

9. Five major differences in Goods and
Services Marketing
5 The Consumers’ Role:
• Consumer behavior for services is more
difficult subject of study as he might be
involved in design and delivery of service
• Purchase and consumption are simultaneous,
therefore his behavior during encounter must
be also considered
• Most services are evaluated on quality and
performance after experience

10. Three Criteria of evaluating quality
by a customer
• Search quality: attributes consumer searches
before purchase - colour, size, fit, feel, smell,
price, service facility
• Experience quality: can be determined after
purchase or during consumption - taste, pain,
pleasure, comfort,
• Credence quality: consumer is unaware or
lacks technical knowledge even after
consumption - car repair, medical operations

11. Service-Profit chain
• Research establishes a strong relationship
between customer satisfaction and
profitability. However in services, a strong
link has been found between customer
retention and profitability

12. Hesket’s 7 propositions on ‘Service
profit chain’
1. Profit and growth are linked to customer loyalty
2. Customer loyalty is linked to customer
satisfaction
3. Customer satisfaction is linked to service value
4. Service value is linked to employee
productivity
5. Employee productivity is linked to loyalty
6. Employee loyalty is linked to employee
satisfaction
7. Employee satisfaction is linked to internal
quality of work life

13. Internal Quality of life
• Workplace design
• Job design
• Decision making latitude
• Selection and development
• Rewards and recognition
• Information and communication
• Adequate ‘tools’ to serve customers

14. Why customers switch
1. Pricing
• High price
• Price increases
• Unfair pricing
• Deceptive pricing
2. Inconvenience
• Location/hours
• Wait for appointment
• Wait for service

15. Why customers switch
3. Core service failure
• Service mistakes
• Billing errors
• Service catastrophe
4. Service encounter failure
• Uncaring
• Impolite
• Unresponsive
• Unknowledgeable

16. Why customers switch
5. Employee response to service
failures
• Negative response
• No response
• Reluctant response
6. Attraction by competitors
• Found better service

17. Why customers switch
7.Ethical problems
• Cheat
• Hard sell
• Unsafe
• Conflict of interest
8.Involuntary switching
• Customer moved
• Provider closed