A product may be a physical "good" or a "service" or a blend of both. You need to understand this view very thoroughly. It’s easy to slip into a limited, physical-product point of view. We want to think of a product in terms of the needs it satisfies. If a firm’s objective is to satisfy customer needs, service can be part of its product – or service alone may be the product – and must be provided as part of a total marketing mix.
A product can range from a 100 percent emphasis on physical goods – for commodities like common nails – to a 100 percent emphasis on service, like advice from a lawyer. Regardless of the emphasis involved, the marketing manager must consider most of the same elements in planning products and marketing mixes. Given this, we usually won’t make a distinction between goods and services but will call all of them "products." Sometimes, however, understanding the differences in goods and services can help fine-tune marketing strategy planning. So let’s look at some of these differences in terms of three factors:
1. How tangible is the product? Because a "good" is a physical thing, it can be seen and touched. You can try on a Benetton shirt, thumb through the latest People magazine, or smell Colombian coffee as it brews. A good is a tangible item. When you buy it, you own it. And it’s usually pretty easy to see exactly what you’ll get.
On the other hand, a "service" is a deed performed by one party for another. When you provide a customer with a service, the customer can’t keep it. Rather, a service is experienced, used, or consumed. You go see a Touchstone Studios movie, but afterwards all you have is a memory. You ride on a ski lift in the Alps, but you don’t own the equipment. Services are not physical – they are intangible. You can’t "hold" a service. And it may be hard to know exactly what you’ll get when you buy it.
Most products are a combination of tangible and intangible elements. BP gas and the credit card to buy it are tangible – the credit the card grants is not. A McDonald’s hamburger is tangible – but the fast service is not.
2. Is the product produced before it’s sold? Goods are usually produced in a factory and then sold. A Sony TV may be stored in a warehouse or store waiting for a buyer. By contrast, services are often sold first, then produced. And they’re produced and consumed in the same time frame. You can’t perform a deed and then put it on the shelf. Thus, goods producers may be far away from the customer, but service providers often work in the customer’s presence.
A worker in a Sony TV factory can be in a bad mood – and customers will never know. And a faulty TV can be caught by a quality control inspector. But a rude bank teller can drive customers away. The growing use of computers and machines in service businesses is partly an attempt to avoid this problem. An automatic teller machine can’t do everything, but it’s never rude.
3. Services can’t be stored or transported. Services are perishable – they can’t be stored. This makes it harder to balance supply and demand. An example explains the problem:
MCI is a major supplier of long-distance telephone services. Even when demand is high – during peak business hours or on Mother’s Day – customers expect the service to be available. They don’t want to hear "Sorry, all lines are busy." So MCI must have enough equipment and employees to deal with peak demand times. But when customers aren’t making many calls, MCI’s facilities are idle. MCI might be able to save money with less capacity (equipment and people), but then it will sometimes have to face dissatisfied customers.
It’s often difficult to have economies of scale when the product emphasis is on service. If a firm is serving a large group of customers, it may be able to justify adding more or better equipment, facilities, or people to do a better job. But services can’t be produced in large, economical quantities and then transported to customers. In addition, services often have to be produced in the presence of the customer. So service suppliers often need duplicate equipment and staff at places where the service is actually provided. Merrill Lynch sells investment advice along with financial products worldwide. That advice could, perhaps, be produced more economically in a single building in New York. But Merrill Lynch uses small facilities all over the United States and other countries – to be conveniently available. Customers want a personal touch from the stockbroker telling them how to invest their money.
Providing the right product – when and where and how the customer wants it – is a challenge. This is true whether the product is primarily a service, primarily a good, or, as is usually the case, a blend of both. Marketing managers must think about the "whole" product they provide, and then make sure that all of the elements fit together – and work with the rest of the marketing strategy. Sometimes, a single product isn’t enough to meet the needs of target customers. Then, assortments of different products may be required.