13 Differences in marketing of products and of services

13 Practical Differences Between

Marketing of Products and Services

The distinction between “Pure products” or “Pure services” is used mainly for pedagogic purposes so that the students understand why the two types of businesses need to be managed differently. This handout explains howhow What The reason for this distinction is that because the customers need both specific products and services in their buying and usage journey over a period of time. Customers will not buy many products if  process of before together at the time of ; most of the time they come bundled together. When you visit a restaurant, you look forward to the food (product) as well as ambiance and experience (service).  

1.     TRAVEL IN PLACE AND TIME : Products can be made in one  place at a given time and  can travel to customers who are at  another place and time. Hence there is a channel transporting goods from one place and time to another. Hence there is inventory which needs space, money and handling. For services there is no such gap between the producers and users as both service givers and buyers need to be in the same place at the same time. Customers travel to service sites where service givers are present or the service givers travel to the customers hence there is concept of appointments, reservations, time tables,  stations and sites.    .

2.     WHAT GETS BILLED : The benefits of a product are inside a box and such boxes get transported to the customers through distribution  channels. The unit of sale for a product is the physical unit. On the other hand, the services are site /location based and the customers need to be travel to these locations. The unit of sale for a service is by time (per hour, per visit) or per experience (play, flight) or per procedure  (haircut, surgery, hair colour).   

3.     CUSTOMIZATION :  Customers like their products to be standardized so that they can search, pre-inspect, buy and use the same standard benefits put into the package by the factories. Customers like the services to be personalized or customized . A service cannot be pre-inspected and  needs to be undergone. Part of the service can be inspected (service scape and personnel)  , part of it can be experienced (music, art, haircut) and some of it needs to be believed (education).  

4.     QUALITY : expected from a product is mostly embedded in the product itself at the time of its manufacture and depends in turn on the quality of the materials used and the settings of the machines. Both materials and machines, being inanimate, can be standardized. On the other hand the qualities that people expect from  service are different : customization and variation is appreciated in service and this depends a lot on the experience, skill and motivation of the service-giver on the spot.

5.     TANGIBILITY : The products are tangible and can be inspected / sampled before buying and can be carried in a bag by a customer. Service is experiential and sometimes based on a belief.

6.     SCALABILITY :  The product business is scaled up by expanding the manufacturing capacity , distribution and sales reach, and access to more customers. On the other hand, the service business is not easy to scale up - it needs a supply of trained service providers and this involving either poaching people from the competitors or increased activity of recruitment, induction, training and motivation. Attrition of trained manpower is a danger to service business.

7.     OWNERSHIP : A product ( flat, car, machine) can be owned and can go into your balance sheet as an asset and is re-salable and you can accumulate it to build your wealth. A service ( degree, surgery, haircut) cannot be owned as is always shown as an expense. It is not resalable and cannot be transferred to someone else. Products begin as materials and machines work on those materials to create improved / shaped / transformed materials which are called products. Services begin from service givers and improve / shape / transform  objects (woodwork), bodies (surgery), minds (education).

8.     BENEFITS: The customers buy "products" essentially for what they find inside the box. The  customers buy "services" for the value of they find in the "encounter" with the service provider - whether doctor, waiter or a consultant.

9.     QUALITY : of products depends essentially on how materials are chosen and converted and can be specified and objectively inspected. The quality of the service depends on the servicescape and the skills and attitude of the service givers.  

10. SENIOR MANAGEMENT :   In product business the decision makers and the managers are the heroes because of their decision making ability. In service business the front line employees are the real heroes because of how they interact with the customers in  a customized and pleasing way. .

11. VALUE  DEVELOPMENT : The process of creating a market-driven design in a product business involves lot of time by experts doing off-line work at the back (invisible to the consumer not present) of situation analysis, formulating specs of material, machines, men and methods. On the other hand, the same process of creating a market driven design needs to happens during interaction with customers  in few minutes in services. The front line - far away from the HO - and without the luxury of experts and time – is tasked with understanding the customer and producing service to satisfy the customer.

12. FIRST  CUSTOMER : In the product business, the customer is outside the manufacturing process and hence two processes need to be created (1) The process of bringing the voice of the customer in the process of product creation (2) The process of physically taking the products to market where the customers are. In the service business the customer is inside the business and his voice / requests /  demands force your front line service providers  to understand and adapt to him. In service business, it is worthwhile to treat the front line service givers as the “first customers” themselves.

13.  THE ROLE OF STANDARDIZATION AND MECHANIZATION : In the product business, a company proactively anticipates what the customer wants, frequently standardizes its products which are made to stock off-line (when the customer is absent) and brings them through the supply chain to where the customers are. Mechanization is used extensively in the processes. The machinery is used to process materials and machines. In product business the role of the machines is primary and the role of the workers operating those machines is secondary. On the other hand in the service business, a company is managed in a reactive mode by asking customers on-line what they desire and then the company tries to deliver it in an individualized manner in real time at the front line. Since the value is created mainly through conversation, individualization and customization , the role of employees is primary and the role of the machines is to assist the employees.