1. COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. C hapter 2 F undamental D ifferences B etween G oods and S ervices

2. COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. INTANGIBILITY: ASSOCIATED PROBLEMS  Lack the ability to be stored  Not protected by patents  Not easily displayed or communicated  Pricing is difficult

3. COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. INTANGIBILITY: SUGGESTED SOLUTIONS  Use tangible clues/physical evidence  Utilize personal sources of information  Create a strong organizational image

4. COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. INSEPERABILITY: ASSOCIATED PROBLEMS  Service provider is involved in the production process  Other customers are involved in the production process (shared experience)  The mass production of services presents special challenges

5. COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. INSEPARABILITY: ASSOCIATED PROBLMES  Customer is involved in the production process:  impact on the type of service desired  length of the delivery process  cycle of service demand  service factory must be built with the customer’s presence in mind

6. COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. INSEPARABILITY: SUGGESTED SOLUTIONS  Focus on the training and selection of public contact personnel  Develop strategies to manage consumers  Develop multi-site locations

7. COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. HETEROGENEITY: ASSOCIATED PROBLEMS  Standardization and quality control are difficult to achieve

8. COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. HETEROGENEITY: SUGGESTED SOLUTIONS   Customization   Constructed to fit customer’s exact needs   Increased profit potential   Standardization   Faster   Less expensive   More consistent

9. COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. PERISHABILITY: ASSOCIATED PROBLEMS  Services cannot be inventoried  Production and consumption cannot be separated by time and space  Statistical sampling techniques cannot be used  Marketing and production must work together

10. COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. DEMAND AND SUPPLY SCENARIOS  Demand exceeds maximum available supply  Demand exceeds optimum supply level  Demand is below optimal levels of supply  Demand and supply are at optimal levels

11. COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. STRATEGIES FOR ALTERING DEMAND AND SUPPLY  Creative pricing strategies  Reservation systems  Complementary services  Developing nonpeak demand  utilizing nonpeak periods to prepare for peak periods  appeal to different market segments with different demand patterns DEMAND STRATEGIES:

12. COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. STRATEGIES FOR ALTERING DEMAND AND SUPPLY  Utilize part-time employees  Share capacity  Prepare in advance for expansion  Utilize third-parties SUPPLY STRATEGIES:

13. COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. STRATEGIES FOR ALTERING DEMAND AND SUPPLY  Increase customer participation  Advantages:  convenience  price  customization  Disadvantages:  loss of control over service quality  may be perceived as an attempt to distance form from customer SUPPLY STRATEGIES:

14. COPYRIGHT ©2002 Thomson Learning, Inc. Thomson Learning  is a trademark used herein under license. ALL RIGHTS RESERVED. THE ROLE OF MARKETING IN A SERVICE FIRM  Different functions are interwoven  Marketing must maintain closer relationships with other departments  Marketing, operations, and human resources should work together.