difference between mktng of service and product

7/29/2019 Difference Between Mktng of Service and Product

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WHAT'S DIFFERENT ABOUT SERVICESMARKETING?Carolyn R. Fryar

A number of fundamental marketing princi-ples differentiate marketing a service frommarketing a physical product. These differ-ences affect marketing as well as communica-tions, both in the perception of quality, and inpositioning or competitive difference. We willconsider here, first, what these differences areand how they can affect your company. Then Iwill analyze the components of a communica-tions plan that can help your marketing com-munications be more effective.

Differences Between

M arketing a Service andM arketing a ProductCompetitive positioning with both services

and products is the key to success in today'smarketplace. It has been said that successdepends on a marketer's ability to clearly dif-ferentiate the product or service from its competition in a way that is meaningful to thecustomer. For example, a well-communicatedpoint of difference can cause one product or

Carolyn R. Fryar is senior vice president and general manager, Metro M arkets division of Kelly T emporary Services, adivision of Kelly Services, the nations' largest temporary help company. She is responsible for overseeing the operationof all K elly Temporary Services' offices in major metropoli tan cities throughout North America.

Fryar joined Kelly in 1972 as an account representative in the Seattle distri ct. In 1976, she was promoted to branchmanager of the Minneapolis office. In 1978, she was named regional manager of the Newark office and in 1981 was promoted to vice president and group director of Branch Operations at the company's headquarters. In 1991 she was namedto her present position.

M s. Fryar holds a bachelor's degree from the University of Oklahoma and an MBA from Seattle University.This article was adapted from a speech given at the annual marketing conference of The Conference Board.

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service to be worth full price while competitors are forced to di scount. C ommunicati onsmust play a key rol e in sell ing and promoti ngthis difference in the perception of the customer. Products are produced prior to consumpti on and can be stored and inventori ed.

W hen a customer buys a physi cal pro duct,however, that customer is also purchasing aservi ce. T he marketing textbooks call this phenomenon "co-production." The most important mark eti ng questi on a co mpany mustanswer is "W hat busi ness are we in? " M anymarketers dismiss this issue as unimportant,assuming that if we make bread, we are in thebread business. Defining your business, however, can lead to surprising success. T he mostpopular example is M cDonalds.

The unique version of quality permeates everything one does andcommunicates.

M cDonalds is not in the hamburger busi ness.I ts hamburgers are actually not very dif ferentfrom those of the competiti on. M cDonalds is inthe service business: "...you deserve a breaktoday, ...we do it all for you.. ." M cD onal ds'competitors seem to dismiss the service mar

keting and attack on the product level:"...where's the beef..." or "...Flame-broiled versus fri ed..." A s long as M cD onalds hol ds itsposition during these "burger wars" and doesnot react hamburger for hamburger, those competitive wars usually do very little to damageM cDonalds.

A nother good example is Federal Express. Itstarted in the freight forwarding business, buttotally redefined its business and started a newcategory. The company answered the question,"W hat busi ness are we in ?" It was not j ustfreight forwarding.

T hen there's Domino's, where for many customers the delivery is more important than thepizza. M ost successful products have buil t-i nfeatures that both target and segment them.Even if one specific product is "positioned" tobe, for i nstance, consumed only on T uesday,

sales and inventory replacement could stillspread the manufacturing and deliverythroughout the week. A marketer of a servi ce,however, must be careful that the service workers are not overworked one day a week andidle the others. A services marketer has to

appeal to a broad segment of consti tuents. T hebest example of this problem was PeopleExpress air l ine. I ts marketing peopl e definedits busi ness as "clearly posi ti oned as dif ferentfrom its competition, clearly positioned toappeal to the discretionary traveler." The trouble was that it was too specificall y segmented.Its planes were almost empty during the middle of the week, because few business peoplewanted to fly wi th al l the backpack ers. T hecompany had such an uneven utilization on its

resources that it was forced out of business.T hus , a product marketer can segment

between brands, having one brand for eachsegment of the population. For example,Procter & Gamble makes six different detergents, each wi th a different brand name, eachwith its own built-in segmentation, each carefully positioned as different in some way. Aservices marketer, on the other hand, cannotdo that without ending up like People Express.One brand name must provide a full range of

services and appeal to enough segments to fillthe capacity during all days of the week.

H ow can you position a branded service asdifferent from competition if you must servicemultiple segments of the market? Services runa dangerous risk of being perceived as a commodity. One airplane seat is like another, onelawyer is as good as the next, all doctors todayare equally unwilling to make housecalls.

To appeal to different segments of the popu

lation, a services marketer must sell multipleproducts under the same company or brandname to different segments of the constituency.Doing that takes a very skillful balancing act. Aservices marketer must learn to live with theincreasing segmentation and changes in themarket by expanding and being flexible withinhis or her company and brands. In otherwords, to appeal to a full range of constituents,

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one must offer all segmented appeals withinone brand.

T he si tuati on can be even more compl exthan that. W hen choosi ng between two cans ofvegetable soup, a consumer can stand in the

supermarket isle with one brand in each handand compare the ingredients, weight, and soon. T he definiti on of "quali ty" becomes tangible, or at least a product marketer can enhancethe perception of quality through physicalclues. Procter & Gamble puts "bl ue beads" inone of i ts detergents-chemi cal ly no dif ferentfrom the whi te components, but an effectiveway to enhance the perception of extra cleaning power.

M ost successful pr oducts havebuiltin features that both target andsegment them.

In a service, however, there often is no physical product into which to put "blue beads."A s a matter of fact, one of the probl ems ofdesigning a marketing approach for a service isthat it is difficult for the customer to perceivethe difference in quality among competitors.For instance, it is difficult to make an objectivecomparison when buying an airline ticket. It ishard to know what kind of quality one mighthave gotten if the other service had been purchased instead.

But this very fact that the perception of quality is intangible to the purchaser makes it moreimportant to provide "blue beads" and to create your ow n versi on of qual i ty. How can amarketer apply that principle?

Some mark eters are doi ng so. W hen thehotel maid is trained to fold the corners ofthe roll of toilet tissue for the next guest, it isa "blue bead," a reminder that an intangiblequality service has been provided just forthat guest.

Customer ContactA service, by definition, involves people in

the delivery of the service. A portion of whatthe customer pays for is manufactured by the

service employees at the time of consumption.T hat means that quali ty control works very dif-ferently with products and with services.Someone who sells services cannot stand atthe end of the assembly line and test samplesfor quali ty. T he maid who folds the ends of thetoilet tissue must be trained to do this, but cannot be supervised during execution.

A gain, M cD onalds is doing it right. T heyreali ze that, to convey the image of eff iciency,nothing is more destructive than to see twoclerks leaning on the counter chatting aboutlast night's date or game, so employees aretrained to always look busy. So M cD onal ds"choreographs" its service workers always tolook busy when they are in the view of the customer, because efficiency is an important partof the planned image.

B ecause servi ce choreography i s an important form of communicati on, most successfulservice marketers make the training of the customer contact employees part of the marketingfunction. People contacts is the most importantaspect of marketing a service.

It has been said that the difference between aservice company and a product company issimply that in a service company, the lowerpaid an employee is, the more contact he orshe has with the customer, whereas, in a product company, only a few of the top employeeshave contact wi th the customer. T herefore,those who are marketing a product aren't asconcerned wi th training. T he important aspectof marketing is the contact between the customer and the product.

Ongoing Relationships with CustomersIf you were to see a Crest T oothpaste user

wi th a tube of Col gate in his or her shoppingbasket, you could be sure of one thing: this isa di ssati sf i ed customer. B ecause produ cts,especially segmented products, are sold one ata time, customers who switch are disloyal.Their personal relat ionship with CrestToothpaste is likely to be interrupted by their"tr i al" of C olgate. M ost servi ces, however,work dif ferently. If a loyal A merican A irl ines

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user were seen on a Delta flight, all one couldconcl ude is that maybe the A meri can fl ightwas filled or left at an inconvenient time. Inother words, the relationship betweenA merican and i ts loyal traveler was not l ikelyto be interrupted by having to fly Delta thatone tri p. T he rel atio nship between a servi cemarketer and the customer tends to be a continuous one.

One brand name must provide a fullrange of services and appeal toenough segments to fill the capacityduring all days of the week.

T hat si tuation has both advantages and prob

lems. A manufacturer of a product, such asT ide detergent, can reformulate and change theproduct and communicate that change quiteeasily. All the company has to do is pri nt "new& improved" across the box and it may regainthe customer who was about to be lured by thelatest innovation from some other brand. A services marketer, however, cannot do that so easil y. H ow does one tel l loyal custo mers thattheir bank's servi ce is "new & improved?" H owdoes one regain customers who are about to belured by competition? A services marketer whoreally believes that the relationship with thecustomer is a continuous one does not think interms of "regaining."

A good analogy is marriage. H ow does someone make an ongoing marriage "new &improved?" By doing something unexpected.By bri nging a gift home on a W ednesday afternoon. By sending a card. In other words, byrenewi ng and refreshing the relationship fromtime to time, to keep it as personal as possible.T his is why good servi ces marketers are suchheavy users of direct mail: customers like tohear from their old friend. It is a good way topersonalize the service relationship.

T here is more that can be done, how ever.L et's consi der one of the greatest mark eti ngsurprises of the decade.

W hen banks i nstal l ed automati c tell ermachines, the main purpose was to save on

labor costs. T hey were a way to provi de customers with 24-hour access to their accountwithout having to pay for 24-hour humantel lers. T here was a lot of apprehension. W hatkind of customer contact was this impersonalmachi ne going to make? Woul d it alienate thecustomer?

B ut a f unny thi ng happ ened. M any customers preferred the machine over the humanteller. M any customers who disli ked having tostand in line for a human teller, who becameirked when the teller got a phone call or, forsome other reason, was delayed in the middleof a transacti on, turned out to be much moreforgiving with the automated teller machine. Ifthe transaction got aborted, they were likely toblame themselves, saying: "I was never verygood with machines!" and they would patiently try again.

T hi s rel ationshi p was such a surpri se thatseveral interesting books have been writtenabout it. The psychologists' conclusion israther curious: they said it was a matter ofinvol vement. Y ou are punchi ng numbers into ateller machine, you are personally involved inthe transaction. Therefore, you are much moretol erant. B ut when you are a pow erl ess cus

tomer in a l ine dependi ng on a human clerk,you are not involved and are, therefore, morelikely to be hosti le and resentful .

To appeal to a full range of constituents, one must offer all segmented appeals within one brand.

M any servi ces marketers have adopted thisfinding. National Car Rental has recently introduced sel f- service rental facil i ties. A meri canA irl ines is experimenting wi th it system-wi defor making reservations. AT&T now designs itscommercial units so the customer can programthem himself, without having to call a serviceemployee. M any banks facil i ties offer di rectaccess to accounts. M ost of these trends are notjust labor-saving devices, although that may bean addi tional benefi t. T he secret to a satisf iedcustomer is an involved customer.

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Inventory CapabilityOne difference between products and ser

vi ces has to do wi th storage. Physi cal productscan be stored and put into inventory. They canbe co nsumed on T uesday even if they w eremanufactured last week or last month.

A service, however, cannot be put intoinventory. T here is no way to recover moneyfrom a service that went unsold yesterday. A nempty ai rl ine seat can never be sold after thepl ane leaves. A n unused hour of a lawyer cannot be sold the next day.

A service marketer has the most peri shableform of inventory.

A Communications Programfor M arketing Services

B ecause of the di f f erences in marketi ngfundamentals, selling a service is a very dif-ferent task than sell ing a physi cal pro duct .W hat i mpact do these di f f erences have ondesigning a communications program for aservice marketer?

First, because the customer pays for both apre-produced product and a "co-produced"human service delivery, the services marketermust explain both parts in the communicationprogram.

M ost successful servi ce marketersmake the training of the customercontact employees part of the marketing function.

T he defi ni tion of what a servi ce marketersells is not always built-in, and so service com

panies must be extremely careful to clearlydefi ne the busi ness they are in. T hi s is themost important step in a marketing program, aswas seen w i th the M cD onal ds and F ederalExpress examples but, unfortunately, it is theone marketers pay least attention to. M arketersoften seem to enjoy the price competition thatgoes hand in hand with the customers perception that all services are basically much alike.

The very fact that the perception ofquality is intangible to the purchaser makes it more important to provide and create your own vision of

quality.Because the risk of being perceived as a com

modi ty i s muc h greater for a servi ce, it isi ncumbent on the marketer to fi ght that ri skand have a unique vision of what they do better than the competiti on. T he uni que vi sion ofquality permeates everything one does andcommunicates.

Service companies must sell multiple products under the same brand name. T herefore,

their communications program must distinguish their products from those of the competition. From a communications standpoint, thisis probably the most diffi cult chall enge.

Since the customer cannot identify qualityobjectively, a good communi cati ons programwill show the customer what to expect. It will"rehearse the service experience" so that thecustomer comes to the transaction fully prepared. Part of that 'rehearsal' will highlight theclues, the "blue beads" that have been chore

ographed into the service.A nother fact of sell i ng servi ces is heavy

reliance on personal contact with serviceemployees. T herefore, a company must use itscommunications program to establish a "rolemodel" for its employees. The service workersmust know what is expected of them. How canthey ensure that the customers know their service is better than that of competitors?

M any managers forget thi s poi nt. At annualpep ral l i es, they say, "W e are goi ng to be aleader in our market segment!" But they forgetthat a person behi nd a counter or answeringthe phone gets very little coaching from thepronouncement. How does a "market leader"answer the phone? What can one do dif ferentlybehind the counter? How can one know how toprovide a better service than the competition?

T he communi cations program must play an

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important role in keeping the ongoing relationship fresh and personali zed. There should be acontinuous stream of information to consumers about what is new. Airlines do a verygood job of that with their frequent fliers.Other services use direct mailings.

The secret to a satisfied customer isan involved customer.

Those customers who become so involvedthat they speak of the service in personalterms, as "his or her" company, will be loyalenough to pay top dollar for that service.

Finally, the fact that a service marketer cannot sell from inventory makes it much moreimportant for marketing and communicationspeople to provide tactical programs so thatdemand and supply match each other at alltimes. Well-planned tactical programs can atthe same time provide a good stream of "news"about a company. Here, too, direct marketing isproving to many service companies that theircurrent customers are their best prospects.

In summary, services managers must understand the fundamental difference between theskills and tools required for marketing a serviceand those for marketing a physical product.

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difference between mktng of service and product

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