Four Factors That Distinguish Services

Marketing
by Cynthia Coldren
Published on January 31, 2006

It's been called "selling the invisible"delivering intangible services as a core "product" offering.

Law firms, management consultants, IT services and telecom providers, architectural groups,
healthcare and educational organizations, financial and insurance institutions, and a multitude of
business-to-consumer operations profit from performing and delivering people-based services.

But invisibility, or intangibility, is just one factor that distinguishes services marketing from product
marketing. Along with inseparability, variability, and perishability, these four characteristics affect the
way clients behave during the buying process and the way organizations must interact with them.

Additionally, these characteristics influence the development of marketing strategies and the more
tactical marketing mixfrom the "packaging" and pricing of services bundles, to defining distribution
plans and promotions options.

To ensure business success, services marketing professionals must clearly understand these
characteristics, how they affect client behavior, and how their organization can respond to diminish
engagement risk, improve customer perceptions, and enhance market opportunities.

Intangibility

Services are not physical and cannot be "possessed." Because they can't be seen, touched, or made
tangible in some way, assessing their quality and value is difficult.

A services client will never know how good the service is until after he receives it. In some cases, it
actually may be months or years before a trigger event occurs to activate the service, at which time the
client hopes to experience the promised service quality (e.g., an IT crisis triggers service, or an accident
initiates an insurance claim).

This can be unsettling for the client, whose response is to look for tangible signals about the service
process and quality prior to purchase to reduce uncertainty and reservation.

The Marketing Response: Services marketing professionals must determine how to effectively
communicate the services process, deliverables, and benefits in order to build client confidence.
Tangible signals that indicate services quality and value come from personal interaction, trusted
recommendations, clear communications, equipment used or processes followed, pricing, and the
physical environment in which the business operates.

With promotions, a logo symbol can offer a sense of tangibilitythe "good hands" of Allstate, the
Merrill Lynch bull, the Prudential Insurance rock. Testimonials and case studies can be used to build
client confidence and rapport. The communications material itself (paper, design, and content) can
convey quality, too.

Pricing can also be an indicator of quality: Premium pricing often suggests higher quality, while prices
that are too low may hint at the inexperience, limited depth, or vague processes of the services
producer.

But tangibility must extend beyond promotions and price. Because positive personal interaction and
"chemistry" is a gauge of quality to the client, marketing as a discipline must be influential in the
training of sales and service associates. These individuals literally are the embodiment of marketing for
the organization. Their ability to deliver on the brand promise affects business success.

Therefore, creating client relationships, setting appropriate expectations, and learning to represent the
company in an acceptable way (e.g., through appearance, attitude, and communications) should
augment standard knowledge and process training. Because it is critical to services delivery, the
success of client interactions should be quantified, measured, and improved with regularity.

Inseparability

The production of the services can't be separated from its consumption. For example, the production
and consumption of a medical exam happen together, as do many consulting services and IT
maintenance contracts.

This leads to two important factors. First, the client is, essentially, "in the factory," watching
production all along the way. It is very important for a service provider or consultant to carefully
manage the "production process" as the client is able to observe it in action and make judgments about
quality and value.

Second, the client often expects the service to be provided in a specific way or by a specific
individualand that can pose challenges in assigning staff, managing the process, and ensuring the
frontline people display the appropriate knowledge, attitude, and appearance when delivering the
service.

The Marketing Response: Services marketing professionals can encourage client participation during
the delivery process. As the client is engaged through interviews, strategy sessions, regular
communications, testing, and face-to-face updates at major milestones, he gains confidence and builds
commitment to the engagement and relationship.

To manage distribution and pricing considerations in the face of inseparability, the marketing
professional can identify the level of personalization that the client requires and the company can
support. For example, interactions can be managed through conference calls versus on-site visits, or
exchanges can be shifted from high-contact to low-contact operations (e.g., personalized banking to
ATM or online banking). These changes should be carefully evaluated to ensure client acceptance and
positive brand impact.

Variability

Sometimes called "heterogeneity," services quality and consistency are subject to great variability
because they are delivered by people, and human behavior is difficult to control. Personal performance
and quality can vary by time of day (people get tired), time of month or year (during tax time for
CPAs), workload, experience, attitude, knowledge, and other factors. Maintaining client trust during
lapses (which will happen) is critical.

Also, variability is why it can be risky to have one person make the sale and establish the relationship,
and another deliver the service. The original contact person is the one who reduced risk for the client;
when someone else delivers the service, the client may become agitated or wary.

The Marketing Response: Services marketing professionals particularly can overcome variability by
developing special service packages.

For example, the level of quality to be received can be deliberately limited. IT maintenance contracts
frequently offer a range of service packages (e.g., from "basic" with response in 4-6 hours, to
"premium" with immediate, on-call support). Standardizing some service offerings enables the
organization to be very specific in noting service and quality deliverables, thus decreasing variability
and meeting client expectations simultaneously.
When this method is used, variability can become a point of differentiation as it enables flexibility and
services customization.

When promoting services, marketers can overcome client concern about service consistency in two
waysthrough team introductions and through positive referrals. The sales leader should make it clear
that a qualified team will work with the client, and schedule face-to-face introduction and discovery
sessions to smooth the next-phase transition process.

In addition, positive word-of-mouth referrals, written testimonials and case studies, or reference-able
accounts can dispel client concerns about variability.

Because things can and do go wrong, the services producer should know how to deliver a professional
client response. How quickly the response is delivered is critical. The objective is to maintain client
trust; so shifting blame, explaining it away, or ignoring it can further damage the relationship. The
services producer should provide an apology, fix the problem or situation quickly, make up for the
inconvenience with additional free services or a token of appreciation, and determine the reason for the
error and fix it at the rooteven if it means people or process changes.

Finally, research shows that employee satisfaction is the most important factor in providing high
quality service. Potential client interaction problems can be minimized through adequate training,
empowering employees to make more customer-focused decisions, and rewarding them for positive
customer-oriented behavior.

Also, establishing employee feedback mechanisms so that management can hear and take action on
issues of concern will strengthen employee perceptions of the company, increase satisfaction, and
result in better client interactions.

Perishability

You can't store services for future use. When a client misses an appointment with his attorney, that
time can never be recaptured. When hotel rooms are empty and theater tickets go unsold, the inherent
value vanishes.

Perishability also affects performance, as balancing supply and demand can be difficult. Demand may
be seasonal, time sensitive, or crisis driven. When demand fluctuates, it can be a challenge to maintain
high performance levels.

For example, a CPA at tax time may have difficulty giving the same personalized attention as at other
times of the year. In IT services, performance could be tested during peak times of disaster recovery,
massive server outages, or when juggling new installation projects in four states. While product
marketers handle supply/demand issues through production scheduling and inventory management,
services marketers don't have that advantage.

The Marketing Response: Unlike the other three characteristics, perishability primarily is a concern of
the service producerthe client is aware of this factor only when there is an insufficient supply and he
has to wait for the service. For the services marketing professional, perishability affects pricing and
distribution most distinctly.

If the services are particularly time sensitive, demand-based pricing can be instituted as with airline
tickets, seasonal vacations, or even a partner's hourly fee structure. For many services, managing
demand is handled by scheduling delivery through appointments, while increasing supply is addressed
through multiple locations or additional site personnel.

Another way to balance supply-demand issues is through the use of retainer agreements. For those
services that are long-term, maintenance, or consultative in nature, this pricing and delivery method
ensures the client of ongoing services delivery with a greater consistency in quality and allows the
services producer to establish a more predictable cash flow and forecasting scenario.
The Final Factor

What's right for your services organization? How can your company strengthen client relationships and
improve its competitive position?

Understanding the characteristics of services can provide a unique opportunity for services producers
to improve business success by rethinking their pricing models and packaging options, improving
production processes and client participation, enhancing customer focus, and building employee
relationship skills.

Read more: http://www.marketingprofs.com/6/coldren2.asp#ixzz1uvrr20v4