Question

The four major characteristics of services are intangibility, inseparability, variability and perishability. Managers could efficiently incorporate these characteristics into their strategies and increase firms’ profit. For example, yield management (also called revenue management) is a differential pricing strategy utilizing the perishability characteristic. Yield management is to charge the right customer the right price at the right time. Service providers often have capacity constraints (think about hotels, airlines, and restaurants). For example, if a flight departs from Chicago to New York City with half of its seats empty, this means the profit associated with the empty seats is gone. Leisure travelers often book their seats ahead of time, and have flexible schedules. On the other hand, business travelers often book the tickets at last minute, and most often, the payment could be reimbursed by the company. Overall, leisure travelers are more price sensitive, and business travelers are less price sensitive. Thus, for the same flight, the airline company could charge a low price when it is 2 month till the departure time to encourage leisure travelers to book. When the departure time gets closer and when the number of unsold seats reduces, the ticket price increases. Please discuss how to incorporate these service characteristics (intangibility, inseparability, variability and perishability) into marketing strategies (such as the yield management example we discussed above). You could use your own experience or articles from businessweek etc to support your argument.

Answer 1

1. Intangible services are, in simple terms, something that cannot be seen or touched. For example- travel and tourism, education, repair, brokerage services etc. Unlike tangible products that can be displayed, intangible services are cannot be performed or displayed. The consumer cannot touch or smell the service being provided. The marketing manager may come up with different startegies for different services to make fulfill his responsibilty. For example- A banker may assess the value a consumer places on the convienences and benefits associated with the provison of a credit card he intends to sell. Another example could be two fast food chains selling same products, say, burgers- Mc Donalds and Burger King. The service providers can offer clean dine in spaces, polite staff etc that consumers can see so as to attract and retain consumers. The marketing manager may thus conduct extensive research and train staff.

2. Inseparability is the characteristic where the product is produced and consumed simultaneously, i.e. the service has to be produced and consumed at the same time.For example- warehousing, laundry,salon, plumbing, doctor etc. The service has to be experinced by the consumer. A doctor treat a patient being physically present in fornt of him. A consumer may withdraw money from the ATM machine. The marketing manager may look for strategies that may attract more consumers. For example- a doctor may treat patients by communicating more with them, answering all their queries. ATM machine users may be provided with adequate cash, security services etc.

3. Variablity implies differnce is the standardization of service being provided. The same service could be charged more or less depening on who is providing that service, when is the service being provided or how it is being provided. For example- you can get your hair cut done by the renowned hair stylist at USD 50 and the same hair cut done by a local barber at $5. Airline tickets sold near the date of travel is sold costly, without any differnece in the quality of service being provided. A good when launched is sold costlier than after two-three months.

4. Perishability implies that the good or service cannot be stored for later use. Services and some goods cannot be stored, saved, or returned. These goods or services cannot be re used by any other consumer. For example- Unsold tickets of an airlines cannot be sold when the plane has already been took off or college seats cannot be filled after the start of the course. The marketing manger may strategize according to the demand for the product or service. In case of high demand, he may hire more staff. Prices may differntiate during peak and off peak hours.