If asked, we could all list tangible goods: a car, a radio, a book, pens, soap, perfume. We could also quite easily list intangible services: public transport, legal advice, education, medicine, entertainment.
However, the distinction is not quite as straightforward as this would imply. In general, most products are accompanied by services, while services tend to have products that support them. It would be difficult to find services that are now available without the involvement of some products.
For example, some retailers may rent television sets and apply the rental payments towards their final purchase. The firm provides both a service (the rental) and a good (the television set).
Banks, which offer a number of different services to help customers manage their financial affairs, also offer tangible goods to customers such as debit and credit cards, chequebooks and regularly updated information about their products.
The distinction, then, between goods and services is not clear-cut. There are no pure products or services, but each product will have an element of service within it, and each service will have some products. From now on we will use ‘product’ for both goods and services unless we particularly need to distinguish between tangible and intangible offerings.
Given that it is almost impossible to find a service which does not incorporate some tangible good(s) - a local advice bureau is probably the closest we can get - and equally, goods with no services are unusual. Products can really be described only as ‘tangible dominant’ or ‘intangible dominant’, as mostly they are made up of a combination of offerings that forms a package which the customer buys or obtains.
For some products, you could take away the services or the goods and you would still be left with recognisably the same product. For example, if you removed the warranty and financing from the video recorder, you would still have a video recorder.
However, there are some products which rely on both elements being present. A fast-food restaurant must provide food - the tangible element - but also it must cook and prepare the food and serve it to you - the intangible element. If either of these elements were taken away, the result would not be fast food!
The characteristics of services
The special nature of services derives from four distinctive characteristics. These characteristics help shape your internal and external customers’ perception of what your organisation has to offer them. The extent to which these different characteristics apply will also affect the way you manage the service.
Your customers cannot see, touch or experience a service before they buy it, so word of mouth and recommendation are important. This means that your customers need to look for other clues about the quality or value of the service you offer. Whereas customers can test-drive a car, they cannot test a bank’s current account before they sign up. You could watch a hairdresser cut someone else's hair but few people would do this.
Instead, you will probably look for other signs as to the quality of the service provided. You may be influenced by the physical environment, the cleanliness of the salon, the dress of the staff, their politeness, or by their qualifications as shown by certificates on the wall.
Customers may also make an assessment according to the price charged. If they think it is too cheap they may guess that the quality will be low; if it is too expensive, they may believe that they are unlikely to get value for money.
Services are normally sold, produced and consumed at the same time, unlike goods, which are manufactured, stored, sold later and consumed later still. Obviously, if you have your teeth checked by a dentist you have to be there while it is being done. The dentist is the person who provides the service and is therefore part of it.
The factory manager may produce, or help produce, the can of baked beans, but they are not part of the product.
Furthermore, when you are sitting in the dentist’s chair, you can affect the service being provided; you are, in effect, a co-producer of the service. If you are frightened or uncomfortable you may make the dentist’s job more difficult, and so their ability to provide a good service may be diminished.
In some services, not only can you, as the customer, affect the quality of service you receive, but also other customers can affect the service you receive. If you go to a restaurant for a quiet meal and a group of noisy customers comes in, your enjoyment of the meal will be reduced. This is why some restaurants have a dress code, to encourage certain types of customer, and why some restaurants only have small tables, to discourage large groups.
In this way, they can influence the type of customer who enters the restaurant and so maintain an influence over the kind of service their customers will experience.
A further consequence of inseparability is that unlike most goods, which can be checked before they leave the factory services cannot be checked. If there is a problem with a good it is unlikely to reach the customer. In fact, some faulty goods do get through to customers, but usually these can be returned and replaced.
If you go to a hairdresser and your hair is not cut as you want, you cannot ask for it to be returned to the way it was. Often the service cannot be separated from the personality of the seller. Consequently, the provider’s reputation is frequently a key factor in the decision to buy a particular service.
However, services are often sold by people representing the seller. In the case of an insurance company, an agent will promote the service that the company provides. Inseparability means, therefore, that the firm producing a service needs to establish high-quality and reliable training programme for employees, as it is the employees who will be delivering the service.
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