According to, the US National Archives Website, "Products are tangible and discernible items that the organization produces" [these can range from small items such as staple pins to large aircraft. It goes ahead to define services as] "...the production of an essentially intangible benefit, either in its own right or as a significant element of a tangible product, which through some form of exchange satisfies an identified need.".
Examples of services include consultation from a professional like a doctor or lawyer. An example of service as an element of a product, according to Palmer, is "...a car buyer now buys a comprehensive bundle of benefits, in addition to the tangible components of the car.". Service can be as simple as a haircut at a local barbershop to the many services provided by DHL worldwide, a logistics solutions company that operates in over 220 countries across the world and provides parcel delivery, freight transport and supply chain services.
Sale of a product is the exchange of a tangible item for consideration. This exchange is preceded by a number of costs such as manufacturing, storage, displays and merchandising. Services do not incur similar costs as they are provided when needed and the customer mostly comes to seek them from the service providers" premises. Product sales deal with selling homogenous products to customers. These products are sold to customers who inspect and purchase them if they perceive that they will meet their needs. In contrast, service sales require the customer to purchase first and find out later whether their need has been met. The "experience" is what is emphasized on in service sales because there is no tangible product that can be inspected.
Furthermore, there is a risk of product damages and expiries in product sales due to poor packaging, handling, transport or even storage, while services are not exposed to such risks as they are provided when needed and they are intangible in nature so they cannot be stored.
Difference between marketing a product and a service
According to Kotler "...marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and exchanging products and services of value freely with others.".
There are a number of differences in the marketing of a product and a service such as tangibility, satisfaction, quality offering. For instance, products are tangible and customers can get a look and feel of the product before making their decision to buy. Unlike products, service is intangible and the client relies heavily on how well the service provider showcases their ability to deliver the given service. DHL, for example, has its mission statement as "Excellence. Simply Delivered." This, to them, "...means that we want to simplify the lives of our customers. We make our customers, employees and investors more successful. We make a positive contribution to the world.". The service provider therefore also has to market themselves in addition to the service they are offering.
Products are created to meet specific customer needs, hence the marketers endeavor to convey this message to potential buyers. Once this message is perceived and the client purchases the product, they are satisfied. Services, on the other hand, are harder to market as they are hard to relate to the specific needs a client may have.
The quality offering is very easy to establish when looking at a product. The materials used in the finishing of the product and even packaging go a long way to inform customer decisions to purchase a product. In contrast, the quality of a service is difficult to tell upfront and can be perceived differently by individual customers. More effort has to be made in providing consistent service as much as possible, for example, the use of queue metrics at a call center to reduce wait time and improve customer experience.
Importance of service in the service industry
Customer service is defined by Turban as "... a series of activities designed to enhance the level of customer satisfaction. Service offers a complementary role that enforces a customer"s decision in making a buy decision. Service can be through free consultation or training after provision of a given service.".
Services have evolved over time with the progress made in Information technology, and standardization has brought up benchmarks that can be used to gauge the service offered by any company as compared to its industry leaders. Within the service industry, provision of service is an important element to survival for organizations because service reassures the clients. It secures repeated business and provides an avenue for feedback from clients.
Service that delivers or even exceeds customer expectations serves to reassure the client that he/she made the right decision to choose this company as their service provider. This reassurance is critical, especially for the first-time customers who rely on their first experience to make any future decisions in dealing with a particular company. Lack of a follow-up, especially in cases where a complex service was rendered, may result in loss of future business as the customer"s feeling of being abandoned.
Providing excellent service wins customer loyalty and when they feel their needs are being met adequately, they provide repeat business. It also brings in client referrals through loyal clients who bring in their peers resulting in industry growth. In addition, service provision opens up an avenue to obtain feedback from clients. This feedback is crucial for the service industry as it enables making necessary improvements in its service delivery and growth.
Furthermore, service improves the relationship between the provider and the customer as the customer is considered an important player in the growth of the business, hence the service provider also takes an interest in the customers business and its growth. DHL, for example, has a slogan that "We are successful when you are.". This means that to them, the customer"s needs being met through the provision of service means most.
Importance of service in the product industry
Service in the products industry has evolved over the years and taken up a prominent position in manufacturing companies" offerings to their clients. According to Rentzhog "Services constitute about 80 % of the business offer of some manufacturing companies. The business offers are becoming increasingly integrated and the distinction between services and goods is becoming ever more blurred.".
Service industry, according to Lovelock and Wright, "...makes up a bulk of today"s economy, not only in the US and Canada where they account for 73% and 67% of the Gross Domestic Product respectively but also in other developed industrial nations throughout the world.".
This shift towards a service-driven production industry, in the long run, impacts the economy positively as "manufacturing companies are no longer selling a product but a function, where the services component is a means to help costumers become more efficient and productive in their own processes and business.".
Service provision within a product industry serves to create customer loyalty as the company is viewed to be a partner and not just a mere seller. Services such as warranties and return policies build a sense of confidence in the quality of the product that a customer is purchasing. Free installation and customer training on the use of complex machinery build long-term relationships and loyalty that is beneficial for both parties.
Service provision in the products industry is a major differentiator and advantage, given that standardization of products is easily achievable because of the use of modern technologies and automated production lines. This service, however, should be provided at minimal cost if the company is to remain competitive.
Furthermore, it is through the provision of service that production companies can be able to obtain customer feedback on their products and make any necessary improvements in good time. Provision of service will also enable them to collect data on both market and consumer trends which will aid in innovation and new product development.
The link between customer satisfaction and quality in services
"Customer satisfaction is a response (emotional or cognitive), pertains to a particular focus (expectations, product, consumption experience), and occurs at a particular moment in time after experience or consumption.".
Customer satisfaction is actively sought for by the service industry, according to Suneeta and Koranne, who states that "the competitive environment in the hospitality industry requires every hotelier to seek highest customer satisfaction and service quality proves to be instrumental in achieving it.".
A recent study identified five elements that linked customer satisfaction and service that is "appearance of the business premises, the service provider"s ability to pay individual attention to the client, the ability to deliver services accurately, a willingness to assist the client and trust in the abilities of the service provider.".
A service provider with well-equipped business premises and adequate tools to get the job done will be able to deliver good service for the client leading to customer satisfaction. Poor equipment may lead to poor workmanship or even injuries and failure to deliver on time.
Customers are more satisfied when a provider is able to give them individual attention and meet their unique needs. This shows the willingness on the part of the service provider and the customer is reassured that their needs are a priority for the service provider. Individualized attention also means that the provider is able to make solutions to fit their customer"s unique needs.
The ability of the service provider also influences the level of customer satisfaction. The provider should be capable of delivering on his promises in a timely and accurate manner. Non-delivery and reworks tend to have a negative effect on the level of customer satisfaction. On the other hand, if the service provider is able to deliver beyond the customer"s expectations, the satisfaction of the customer will be much higher.
The link between customer satisfaction and quality in products
In a study by Garvin, 1988, elements that link product quality to customer satisfaction were identified as "...performance, product features, reliability, conformance, durability serviceability, aesthetics and perceived quality.". A product that is able to perform as per the customers" expectations will automatically produce satisfaction for a customer. Product features should be appealing to the customer and should be easy to understand and use.
Reliability of a product means that the product will not break down or fail unexpectedly under normal use. This means the customer will be able to utilize the product to meet their needs consistently over a reasonable period of time. Product conformance to safety and regulatory standards is an important aspect of product quality and this means that the product should be safe for use and not expose the customer to any danger.
In addition, the product should be durable and offer benefits for a long time. Customers will be satisfied with products that are worth the amount they spent on acquiring them. Furthermore, they should be serviceable in order to ensure they maintain their effectiveness and original appealing look even with continuous use. Spare parts for the product should be readily available and cost-effective.
If a product is perceived to be of high quality by a customer, it will provide satisfaction. A high-quality perception is brought about by quality finishing of the product, excellent branding and attractive packaging. This will also ensure that customers can easily identify the product even in a crowded display.
Role of customer relationship management in service industries
Customer Relationship Management (CRM) is defined as "... a comprehensive strategy and process of acquiring, retaining, and partnering with selective customers to create superior value for the company and the customer. It involves the integration of marketing, sales, customer service, and the supply chain functions of the organization to achieve greater efficiencies and effectiveness in delivering customer value.".
Thus, CRM in service industries provides an avenue for the provision of personalized services through customer engagement and collection of feedback from various customers. Enhanced service delivery leaves an impression on clients and secures their loyalty.
CRM demystifies services offered to clients through the provision of client support. A good example is the customer contact center for DHL which provides support for clients as they navigate their way around parcel, freight transport and supply chain business across the globe. This service will be on a personal front and the client will have his queries looked into or escalated if required.
CRM provides an avenue for the organizations to engage with customers and from this engagement, the organization can obtain a credible feedback on their services and collect data that will enable them to forecast future needs of their customers. DHL conducts research on customer trends within the logistics industry. "To keep ahead in today"s changing business environment, the DHL Trend Research team identifies and assesses key social, business and technology trends.".
Furthermore, CRM provides a platform to engage customers with new service offerings, for example, discount vacation and travel booking over an upcoming major holiday. This is an effective way of marketing, especially over social media.
Role of customer relationship management in product industries
CRM plays various roles in product industries such as improving revenues, lowering operating costs, increases product effectiveness and sales efficiency and providing an avenue to build deeper and mutually profitable relationships with the customers. Improved revenues are derived from improved client engagement where a simple inquiry or sales prospect is turned into a buying customer. Various marketing drives can be conducted in CRM, such as brochures or emails on new products and updates on promotions being carried out by the company.
Customer call centers lower operational costs as clients can call in and have their issues resolved within a short time and remotely, saving on travel costs and downtime in case of machinery breakdown. They also provide great avenues for collecting a valuable customer feedback, both positive and negative which in turn can be used in product development and in relating with customers in the future.
CRM increases the effectiveness of an organization by providing valuable data on various customer aspects, such as the type of queries on product specifications or capabilities. This can be used to forecast future trends and incorporated in the research and design process to ensure the company keeps up with market demand. Moreover, sales efficiency is complemented by CRM through providing end to end information on customer demographics buying patterns and ensuring the follow-up of prospects. CRM ensures that customers are not treated as mere buyers but as important long-term clients of the business. This opens up better relations and with it an increased wallet share of the customer"s future business.
Competitive strengths of the product industry versus service industry
Products undergo standardization, as they are largely homogenous in nature and the customer can make their buying decision based on the quality of the product that they can see in front of them. In contrast, services vary depending on the service provider, for example, the services of an automobile mechanic are largely dependent on his level of expertise in working with the particular vehicle. On the flip side, services have the advantage that they can be tailor-made to suit each client"s specification at any point in time for an extra fee or at the same price. This ensures greater client satisfaction as opposed to a product where the client has to wait for the upgraded version which is not guaranteed to have the specifications that they may require of the product, especially if it is mass-produced.
Utility derived by the client
The products industry is able to provide direct and immediate utility to the client as soon as they obtain the product, for example, the value a client derives driving a new high-end vehicle. The service industry, on the other hand, sells the experience to the client and utility is obtained only if the service provider is able to deliver according to the expectations of the client, for example getting a great haircut.
Growth in the size of operations
Products are tangible and largely similar in nature, hence production lines can be expanded to increase output within a relatively short amount of time and therefore improve a company"s profits quickly. Comparing to products, the services industry is largely dependent on the human resource aspect and an upscale of this resource would require more time for recruitment and training. In contrast, the service industry can reduce this time if it goes headhunting for practicing professionals from within it industry, for example, going for experienced hairdressers with their own client portfolio of clients. This may require an increase in costs in the short run as a result of having to pay more for new talents but in the medium to long-term, this will turn around as the client base expands and revenue increases.
In conclusion, the main distinction between a product and a service is that a product is tangible while a service is intangible. Products are more standardized as opposed to services that can be customized to suit client needs. There are a number of differences in the marketing of a product and a service such as tangibility, satisfaction and quality offering. These differences influence greatly the method of marketing that a company will employ. Provision of service is an important element to the survival of organizations as it forms a major part of their business, both in product and service industry. This is largely a result of standardization of the products or services that are offered, given the progress made in information technology. Excellent service provision, therefore, becomes the major differentiator between companies. Service is important because it reassures the clients, secures repeat business and provides an avenue for feedback from clients.
There are five elements that link customer satisfaction and service, including appearance of the business premises, the service provider"s ability to pay individual attention to the client and convey to them that their business and overall relationship is important to them, the ability to deliver services accurately as stated in the marketing material or during the sales pitch, a willingness to assist the client even when the client has demands that may be unique, time consuming or even beyond their ability to deliver. Finally, the client should have trust in the abilities of the service provider.
On the other hand, elements that link product quality to customer satisfaction are identified as product performance, the product"s features which should be appealing and functional, reliability of the product, conformance to desired and regulatory standards so as to ensure safety when in use by the customer, durability of the product and its serviceability, which ensures that the product lasts and continues to perform as expected, aesthetics and perceived quality.
CRM in service industries provides an avenue for the provision of personalized services through customer engagement and collection of feedback from various customers. In the product industry, CRM plays various roles such as improving revenues as a result of increased customer loyalty and hence wallet share, lowering operating costs, increasing product effectiveness and sales efficiency and providing an avenue to build deeper and mutually profitable relationships with its customers.
There are several competitive strengths existing between the product and service industry in terms of standardization, delivery of value and growth in operational scale and timelines involved in upscale of these operations.