(This essay was stimulated by prep work I did for teaching an AMA marketing course. I learned or, more accurately, re-learned some things that I found interesting. Hope you enjoy it. If any students in that class are reading this, I must apologize because this is a much more polished version of what I presented.)

Before the US economy was thought of as the post-bubble economy, the information economy, or even the post-industrial economy, in the early 1980s it was called the "service economy." I don't remember the exact year, perhaps it was around 1983, when the proportion of GDP accounted for by services first exceeded the proportion accounted for by goods. Currently, the proportion of GDP attributed to services is two-thirds of the total!

That's right, two-thirds of the economic activity taking place around you as you read this is services. Let's take a look at some of the components of this total. The following are all services:

- All government activity
- All educational activity
- The travel industry
- The restaurant industry including institutional feeding
- Almost all activity in the healthcare arena
- The entertainment industry, i.e., movies, broadcasting, professional sports, theme parks, etc.
- Banking, insurance, investing, etc
- Recreation, gambling, hunting, fishing, camping, etc.
- The arts, museums, theater
- Scientific research
- Information processing
- Telecommunications
- Advertising and marketing research
- Professional services like accounting, law and, yes, marketing consulting
- And all the things we think we mean when we say "services," e.g., dry cleaning, lawn care, childcare, car washes, oil changes, et al.

Further, even those who think they are in the business of manufacturing and marketing products are still in the service industry. Do you offer credit terms to customers? Do you sometimes pay for shipping? Do you print scanner codes or use RFID or EDI? Do you include post-sales service in your contracts? Do you provide a warranty or a guarantee? (Remember the definition that a product is really a bundle of goods and services . . .)

As a reminder, there are three major differences between service marketing and product marketing.

1. Services are heterogeneous.

This means that the delivery of similar or identical service is very difficult to accomplish and often varies from occasion to occasion. Think of how your meal and the waitstaff's performance can vary at the same restaurant or across different restaurants. Consider how air travel from the time of curbside check in to the landing at the other end may differ from trip to trip. Or how a barber or stylist never seems to do the same thing twice. "He did a good job this time, didn't he?"

This heterogeneity, of course, derives from the fact that people, not machines, deliver services. The business response usually comes in two ways. First, there is an attempt to build a foolproof system that encourages a uniform reaction to the service request. And second is rigorous employee training. McDonald's operation typifies both. Each store is designed the same way, with the same kitchen, appliances and cooking directions. And all employees are trained and retrained--the crew, the managers, and even owners (Hamburg University).

Not surprisingly then, research in the service industry indicates that employee satisfaction and customer satisfaction are correlated. Think Southwest Airlines vs. United Airlines.

2. Services are produced and consumed simultaneously.

The doctor's exam, the professor's lecture, the experience of watching a movie, the flight to LA, the thrill-ride on the roller coaster, etc. do not exist until they are encountered or consumed.

One corollary to this is that there can be no inventory. The closest thing to inventory is having customers wait in line. Another corollary is that services are highly perishable. The movie runs, the plane takes off, the roller coaster rolls whether all the seats are filled or not. The missed appointment is gone forever.

3. Services are intangible.

Thanks to marketing scholar, Ted Leavitt (The Marketing Imagination), this third aspect of services is perhaps the most well known. You cannot touch or look at life insurance, the real benefit of which is typically described as peace of mind. You cannot touch the Theory of Relativity (scientific research) or the ideas in this article (marketing consulting). They are abstract constructs.

Leavitt's sage marketing advice was the memorable exhortation to "tangibilize the intangible." Insurance companies, of course, have tangibilized their products with concrete images tied to the benefit being provided. The Rock of Gibraltar, Good Hands, the Sentry are all examples. United Airlines, on the other hand, replaced their intangible benefit (safe, fast, comfortable travel) with another abstract idea, "The Friendly Skies." Oops.

One could argue that service marketers, who have not attempted to concretize the benefits(s) they provide, have committed marketing misdemeanors. If I'm correct, there's lots of opportunity for marketing consultants, eh?

I'm interested in your thoughts, counter arguments, or examples. Drop me an email.

Copywrite (C) 2012 Gerald Linda & Associates     www.gla-mktg.com     847-729-3403