Service-Dominant and Goods Dominant Products - Term Paper Example

Introduction In general, scholars tend to agree that effective marketing of goods varies significantly from the tasks and considerations involved in marketing of services. As many companies are moving away from marketing individual products to complete service solutions, the focus, therefore, must be shifted. In the intensive tendency to globalization and technological innovation, the products now are viewed as a base for delivery of complete service solutions rather then the final tangible good. The matter is complicated with the fact that the service solutions intending to satisfy customer needs on a global level represent a combination of characteristics of both goods and services, whereas a separate marketing solution for successful marketing campaign is required for goods and services separately. Consequently, a problem of identification, classification, and evaluation of service and goods components of a product with further individualized development of a marketing campaign emerges. A number of studies have been conducted in this area of marketing; however, the field is still relatively new and is more relevant, considering the global market tendency, then ever (Lovelock, C., & Wirtz, J. 2004). Service Dominant versus Good Dominant Products: Overview In order to develop marketing strategies and promotion with planning in particular, the product must be categorized in the first place. Product can be defined as anything offered in a market that might satisfy a want or a need and is further subdivided into two categories: services and goods. The major difference between the two is tangibility: while a good is a material product one can tough and feel, service is intangible and is usually consumed during the production process. As previously stated in the introduction, a global market shift to complete service solutions results in emergence of mixed products, that have characteristics of both goods and services. Examples of mixed type of products that have dualistic characteristics include though are not limited to stocks and bonds, law and nursing, life and insurance services. Depending on the type of features a certain product possesses, it can be further categorized into a service or a good dominant product. The idea behind the categorization can be brought down to the issue of whether a product has more good or service features and thus can be placed on a continuum of good or service dominant products (Lovelock, C., Patterson, P.G., & Walker, R.H. 2001). To illustrate, consider the two service industries: nursing and auto repair industry. While nursing has dominating service elements and can be regarded as a highly service dominant product, auto repair industry has dominant good characteristics as the issue of tangibility rises and thus is considered to be a good dominant product. Consequently, a marketing strategy that distinguishes between elements of goods and services in a product sees a product from a customer's point of view and backwards: seeks a product that would satisfy complete customer needs. Service Dominant and Good Dominant Products: Management Implications Product classification into good and service dominant products has similar implications for both management and marketing. The categorization in a need to imply a separate set of plans to good and service elements of a single product. Consequently, marketing and management approaches differ not only between two, three, or more products, but also between the aspects within a single product. Thus, the approaches are individualized, become more specific fore each product and more complex if to consider an organization as a whole (McColl-Kennedy, J.R. 2003). On the other side of the fence, such categorization offers new opportunities for management of service and good dominated products. Doris Van Doren, Jane Durney, and Colleen Darby when considering the issue of service line management as a strategic tool for generic services, discuss managerial approaches used in health care institutions (1993). While the majority of hospitals are organized and managed in a traditional way along operational and functional lines, there is a distinctive need to shift to external market based perspective. The management system does not focus on a customer and still is based on cost reimbursement. On one hand, such concentration on pure functioning places hospitals at economic risk. On the other hand, redefining services offered into a package to which a customer can relate and thus becoming more strategically positioned and market driven, health care institutions can gain a significant advantage over competitors that are still using the old fashioned management style. One of the specific implications of service dominant and goods dominant products classification is outcome management (Nash, David B., Markson, Leona E., Freund, Deborah A. and Wetzler, Harry P. 1991). This solution interrelates concerns about both quality and cost effectiveness of care: new roles for clinical executives are established. While executives act as change agents within hospitals, concentration on outcomes management service solution may lead to an increase in bargaining power among service recipients. Three Fundamental Qualities and the Four Characteristics of Service Dominant Products The lack of materiality of services or their intangibility alongside with high credence and experience qualities and low search qualities is what distinguishes them from the nature of goods (Palmer, A. 2001). The search quality can be defined as the qualities of a product that can easily be identified prior to purchase. Thus, service dominant products in general have a low search quality: size and material that can be easily assessed by a buyer. When it comes to speaking about experience qualities such as taste and personal treatment, they can be identified only after purchase or during consumption of a service. Consequently, in contrast with goods dominant products, service dominant have a high experience quality. Finally, the credence qualities are the characteristics difficult to evaluate even after consumption, they are not controlled by buyers either during or after consumption. Examples of services with high credence qualities are surgery and legal services. The three fundamental qualities of service dominant products are closely related to the four characteristics that are used for evaluation of the good and service components of a product. While heterogeneity is one of the key characteristics attributed to service that emphasizes high variability in service delivery, inseparability reflects the simultaneous consumption and delivery of service dominant products. These two characteristics are a direct outcome of the high experience quality of a service as well as low search potential, since benefits from usage are both received and identified during the consumption stage. Intangibility of a service is closely related to credence of a service dominant product, both factors consider the ease with which a customer can evaluate services and products. Perishability of a service relates to the experience nature of service, as the services cannot be stored or carried forward into the future but rather are consumed at the moment they are produced. Thus, the relationship between fundamental service qualities and characteristics is direct: characteristics of a service are a specific outcome of quality service analysis used for evaluation of goods and service components in one product (Lovelock, C., & Wirtz, J. 2004). The Three Time Zones of Buyer Decision Process and Service Dominant Product Characteristics Service dominant product characteristics are closely related to the time zones of a buyer decision process. When passing the three stages of this process, a consumer evaluates the benefits resulting from usage of a specific service, whereas service qualities and characteristics directly influence the cognitive process of a consumer. During the pre-phase, when a customer is establishing a need and deciding on further actions to receive an established result by searching and evaluating information, the low search quality and experiential nature of service dominant products comes into play. Whereas a customer cannot directly estimate the size, price of service, he/she still can refer to previous experience of usage of a certain differentiated service thus evaluating benefits through posteriori experience. When it comes to speaking about the second stage that is categorized with direct consumption of the service, the experiential nature and perishability of a service once again should be emphasized, as a customer consumes benefits resulting from the usage of a service mainly at this stage and the service cannot be stored for future usage. The third stage is categorized with post purchase and consumption of a service when customers are evaluating the benefits received and outcomes. At this stage the credence quality should be emphasized, as in relation to some services the benefits might not be estimated at all, whereas the experiential nature allows now to refer to this service again when a similar need might occur. (Palmer, A. 2001). 7 Ps Marketing Mix: Constitutes and Importance In addition to traditional 4 Ps marketing mix, service dominant products strategy is extended to adopt 3 additional Ps: people, process, and physical environment. While the three additional Ps are applicable to services only, the old marketing mix that includes 4 Ps also has significant modifications in relation to services (Palmer, A. 2001) The product itself can hardly be standardized, going even further then this, due to inseparability and variability the staff of the company offering service solutions is part of the product as well. Due to identification of customer staff with the product, the high standard of customer care should be emphasized. Packaging is applicable in this situation too: Jacqui Bishop (2004) gives an example of financial services - opening a bank account that requires complex packaging like cash machines and regular updates when explaining the new marketing mix conception. Thus, in service dominant products packaging is equally if not more important and is considerable more complex. When it comes to speaking about price, in case of services the major expenditure is peoples' labor. Further, the services are perishable and this leads to demand and supply synchronization problems ( Lovelock, C., & Wirtz, J. 2004). Basically, the idea is that if the service was not provided the revenue is simply lost, as services cannot be stored. This adjustment is necessary as it gives an opportunity to analyze the cost benefit relationship. Identification of the most convenient location for key customers in service industry is another part of the marketing mix. Due to perishability of services, they should be available at the spot where a potential customer might need them. Also, in service dominant products, unlike good dominant products, the services are distributed mainly directly that once again contributes to importance of location. In a promotion campaign instead of stressing the direct features of tangible products, marketers should rather concentrate on benefits a service provides. For example, the quality of in-flight food is often advertised by airlines. (Bishop, J. 2004) Due to the fact that a service is consumed when it is sold, the importance of direct selling should be emphasized since production and consumption is a single process. Highly trained and motivated people are essential for the high quality of service provided: people sell and produce the services. Moreover, many consumers make personal judgments about the service provided based on the quality of service they received, especially when it comes to speaking about services with high degree of credence. In this case, the only constitute of consumer judgments may be the quality of customer care as the benefits from the service cannot be directly evaluated. Due to perishability of services, it is essential to have a standardized production process in order to meet the potential demand. The market tendency is to automate parts of service production in order to achieve the most efficient results. Tendency of health institutions to use appointment systems is an example of a service industry attempting to meet the current demand. (Bishop, J. 2004) However, many customers still prefer services with personal touch, thus the importance of skilled people participating in a standardized process is a key constitute of production delivery and consumption of the service by customers. Services are intangible that is the reason why it is of vital importance to provide to customers an evidence of the service they will receive. Aside from this role of physical evidence, this element of a marketing mix provides additional information to customers to make judgments about the quality of the service. Thus, physical evidence is a key solution to assure safety and quality of the service offered to customers. The research conducted by Dick Berry (1990) among senior executives, marketing managers, customer service managers, and product support managers aimed to arrange the components of the marketing mix of services in the order of their importance. The first place was taken by customer sensitivity (customer treatment), followed by product (quality), customer convenience (availability), service (post sale and pre sale), price, place (availability), promotion (presale services and pricing offers). The key component in all elements is human resources, a major constitute of high product quality and customer care solutions. Conclusion The new extended look at service dominant products significantly complicates the marketing solution for this type of products mainly owing to the problem of standardization. Each type of services offered in the market has unique features and requires individual analysis. Aside from this issue, the new model offers great opportunities for innovative marketing strategies aimed at high product quality and maximization of customer care. References Berry, D. (1990). Marketing Mix for the '90s Adds an S and 2 Cs to 4Ps. Marketing News. Chicago, 24(26), 10. Retrieved 17, 2005, from Edith Cowan University multiple database. Bishop, J. (2004). The service touch. Supply Management. London, 9(17), 39. Retrieved 17, 2005, from Edith Cowan University multiple database. Lovelock, C., & Wirtz, J. (2004). Services marketing: People, technology, strategy (5th ed). Pearson Education International. Lovelock, C., Patterson, P.G., & Walker, R.H. (2001). Services marketing: An Asia Pacific Perspective (3rd.) Sydney: Prentice Hall. McColl-Kennedy, J.R. (ed.). (2003). Services marketing: A managerial approach. Queensland: John Wiley & Sons Australia, Ltd. Nash, D.B., Markson, L. E., Freund, D. A., Wetzler, H. P. (1991) Managing Outcomes: The Perspectives of the Players; The Commentaries: A Summary; Perspectives on the Outcomes Movement; Successful Outcomes Management; Keys to Successful Outcomes Management Implementation. Frontiers of Health Services Management, 8(2), 3. Retrieved 17, 2005, from Edith Cowan University multiple database. Palmer, A. (2001). Principles of services marketing (3rd Ed.). London: McGraw-Hill, England. Van Doren, D. C., Durney, J.R., Darby, C. M. (1993). Key decisions in marketing plan formulation for geriatric services. Health Care Management Review, 18(3), 7-13. Retrieved 17, 2005, from Edith Cowan University multiple database. Read More