Chapter 11: Services: The Intangible Product
Service – Intangible customer benefits that are produced by people or machines and that cannot be
separated from the producer
- involves a deed, performance or effort that cannot be physically possessed
Customer Service - specifically refers to human or mechanical activities firms undertake to help satisfy
their customer’s needs and wants
Economies of developed countries have become increasingly dependent on services. This dependence
and growth of service-oriented economies has emerged because
o Generally less expensive for firms to manufacture their products in less developed countries
o Household maintenance activities, which many people have performed for themselves in the
past have become specialized. IE Food preparation, lawn care, cleaning, car repair
o People place a high value on convenience and leisure. Most households have little time for
household maintenance activities
o As the Canadian population ages the need for healthcare professionals also increases.
Services Marketing Differs from Product Marketing – differs due to four fundamental
differences that are unique to services; these differences make marketing for services considerably
Core Differences Between Services and Goods
b) Variable (inconsistent)
c) Perishable (inventory)
a) Intangible – A characteristic of a service. They cannot be touched, tasted or seen like a pure product
can. When you get a physical you see and hear your doctor but the benefit provided itself is intangible
Difficult to convey the benefits of services
Service provider offer cues to help their customers experience and perceive their service more
(Doctors offices with TV’s and games etc.)
Enhance services through providing comfortable atmospheres (Starbucks, Chapters)
Service can’t be shown directly to potential customers without performance thus it is difficult to
Images marketers use reinforce the benefit or value of the service, Professional services rely
heavily on customers perception of integrity and trustworthiness.
b) Inseparable Production and Consumption – Services are produced and consumed at the same time,
that is, the service and consumption are inseparable
Because of this consumers rarely have the opportunity to try the service before they purchase
it. Due to this the purchase risk for some services is quite high, thus they sometimes provide
extended warranties and satisfaction guarantees.
c) Inconsistent (Variable) – The more that humans provide the service in question, the more likely there
is to be variability or inconsistency in the services quality
A restaurant, which offers a mixture of services and goods, generally can control its food quality,
but not the variability in its preparation or delivery.
Marketers strive to reduce variability through training and standardization of procedures
Variability can also be used as an advantage. For example, using micro-marketing segmentation
strategy to provide customized service designed to meet a specific customers needs
Variability can be addressed by replacing humans with machines wherever possible (ATM’s, self-
checkouts etc.) However some consumers either do not embrace replacing a human with
machine or have problems using the technology itself.
d) Perishable (Inventory) –Services are perishable in that they cannot be held in inventory or stored for
use in the future. You cannot stockpile a service as you would inventories of goods
As long as demand for and supply of service remain close perishability is not an issue however
this is rare.
Airlines, cruises, movie theatres, resorts etc. face similar challenges and offer promotions to get
through peak seasons, or even sell bundles of extra seats to websites such as HOTWIRE.COM to
sell over the internet in conjunction with other items for reduced prices.
The Gaps Model – Gaps model is designed to encourage the systematic examination of all aspects
of the service delivery process and prescribe the step necessary to develop an optimal service strategy
See page 304, exhibit 11.3
Types of Gaps
a) Knowledge Gap
b) Standards Gap
c) Delivery Gap
d) Communication Gap a) Knowledge Gap - Reflects the difference between the customers’ expectations and the firm’s
perception of those expectations.
Important early step in providing service is, knowing what the customer wants. To reduce the
knowledge gap firms must understand the customers’ expectations and match those expectations will
actual service through research.
Understanding Customer Expectations – Expectations are based on their knowledge and
experiences and vary according to the type of service. For instance someone’s expectations may
be higher who is staying at a 5 star resort versus a Holiday Inn.
o Also vary depending on situation
o Service provider needs to know and understand the expectations of the customer in its
Evaluating Service Quality – Service quality reflects customers perceptions of how well a service
meets or exceeds their expectations. Customers generally use 5 distinct service dimensions to
determine overall quality.
o Reliability –The ability to perform the service dependably and accurately
o Responsiveness – The willingness to help customers and provide prompt service
o Assurance – The knowledge of and courtesy by employees and their ability to convey
trust and confidence.
o Empathy – The caring, individualized attention provided to customers
o Tangibles – The appearance of physical facilities, equipment, personnel, and
Marketing Research: Understanding Customers- Marketing research provides a means to
better understand consumers’ service expectations and their perception of service quality.
o Voice-of-Customer (VOC) programs – Ongoing marketing research system that collects
customer inputs and integrates them into managerial decisions. Uses various methods
to collect insights and intelligence from consumers and use them to influence or drive
o Zone of Tolerance – Method of evaluating how well firms perform on 5 service
dimensions. The area between customers’ expectations regarding their desired service
and the minimum level of acceptable service. The difference what the customer really
wants and what they are willing to accept before going elsewhere.
o Consumer perceptions are effectively and inexpensively co