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Four Factors That Distinguish Services Marketing

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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 mix—from 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 tangibility—the "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 individual—and 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 ways—through 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 root—even 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 producer—the 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.


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Cynthia Coldren is managing partner of ReThink Marketing (www.rethinkmarketing.com). Reach her at cc@rethinkmarketing.com.

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Comments

  • by pudoo12 Tue Jun 23, 2009 via web

    This page was very informative. Thanks for the tips. Will recommend to others

  • by beat c siamusantu Fri Jun 26, 2009 via web

    the article has made me to present Services from a different perspective, as am a trainer at Cooperative college, where i lecture Agricultural marketing.

  • by mukesh Thu Oct 29, 2009 via web

    very impressive

  • by luciana Fri Sep 10, 2010 via web

    the content is very useful!!

  • by canycio Thu Nov 3, 2011 via web

    good documentary

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