Tim Thomas // Community Futures Fraser-Fort George
Selling services can be an entirely different process than selling goods. That’s why distinguishing between services and goods and classifying your business as one or the other, or both, is very important. To help service businesses hone in on their marketing, let’s look at three considerations that make selling a service different than selling a good.
Defining goods versus services
First, let’s begin with a typical service. It won’t be manufactured so much as it is provided. A haircut is a typical “high contact” service. A typical good is a grown or manufactured product, such as a carrot or a smart phone. So, with that in mind, let’s look at the first of these three considerations.
One well-worn shortcut to discover whether a business is selling goods or services is the “Drop It On Your Foot” test. If you can drop your product on your foot, that product is most likely a good. If not, it’s likely a service. This is because goods are often said to be tangible. They have volume, weight, and other observable traits. Services are said to be intangible. Services are non-material having atmosphere, performance, attitude, opinions, etc.
We can ask a hair stylist, “Just so this does not break my foot, how much does your haircut weigh?” The stylist will look at us funny because we are talking nonsense. By extension, we would be talking more nonsense if we try to compare goods and services by weight. It is nonsensical to ask which is heavier, a stay in a hotel or a ceramic coffee cup.
The coffee cup in the above example raises a thought. Let’s say a barista makes us some lattes. The barista creates a performance. Indeed, some baristas are quite innovative in their performances. But you point out that the artwork in the foam is tangible. Each cup contains about a quarter liter of water. That weighs 0.25 kg. It is tangible, although we cannot weigh the barista’s performance.
This leads us to another aspect about the intangibility of services. Service businesses can have a blend of intangible and tangible elements. Some businesses are dominated by intangible elements, some are nearly selling goods. The more components that are tangible and material, the closer the business is to selling a good. Restaurants, for example, have varying degrees of “atmosphere.” Five-star restaurants have more atmosphere than fast-food restaurants who in turn have more atmosphere than vending machines. We can feel the atmosphere when we enter the five-star premises, but we cannot ask the maître d’ how many kilograms of atmosphere they used on tonight’s Lasagne Verdi al Forno!
Let’s look at the second consideration of selling services – our customers are involved in co-production, not just consumption, as with a good. Again, we’ll use the typical example of the haircut. But let’s turn up the heat and say that we are an expert hair production company that creates hair styles for the movie industry. Movie studios have employees who we must work with, and work on, to create the vision of the movie’s art director. Nearly every day, we have a big-name movie stars sitting in our “amazingly comfortable studio chair.” We must bring the Chair everywhere we go because people are often in it for over two hours per day. We want them to be comfortable for that whole time because we need them to sit still and move their head when we need them to. When they co-operate, they co-produce the hairstyle with us. When they refuse to co-operate, we have no chance of creating a satisfactory result. Thus, when dealing with big stars, we will need specialized people skills so they want to help us.
Simultaneity in services is the fact that service production and consumption (and marketing!) tend to happen at the same time, often in the same place. This is clear to see with those hairstyles. A hairstyle is produced and consumed at the same time, in one location. Goods can be inventoried. Manufacturers can make units, box them, ship them to storage, store them, and when the time is right, sell them.
We cannot inventory haircuts. Even if we invented a (comfortable!) automatic haircutting helmet, we would not be inventorying haircuts, we would just change the location of the haircut and improve convenience.
Service companies cannot inventory services, but there’s more. A service like a haircut cannot begin until a customer demands it and gets into the production schedule (books an appointment), then shows up and co-produces the services with company staff. If no one books an appointment, the time used to produce the service cannot be inventoried either and we lose money.
When our customers must demand a service before it can be produced, we see how the simultaneity of services is linked to co-production. In our movie hairstyle business, we can see the simultaneity of the production, consumption, and the marketing of a big star’s hairstyle. When the service performance goes well, the actor is happy, tells the director and producers who are standing nearby that we are great, and we get more contracts.
To conclude, we can see managing a service business means managing those three considerations, 1) co-production, 2) intangibility and 3) simultaneity. A haircut is high contact compared to a low contact service like a pop machine. But even a pop machine owner needs to consider the co-production, intangibility, and simultaneity of reading the instructions, inserting coins, and requiring the pop buyer to co-operate by pressing the correct numbers on the input pad.
Finally, if your customers are happy with the results your service business creates, they will be ready to set up more business with you, sometimes right at the time of delivery. Prepare your people and processes to help your customers buy and co-produce with you again and again!
About the author: Tim Thomas is the Export Advisor for the Cariboo region, serving the areas from Burns Lake to Valemount and Mackenzie to 100 Mile. Tim has made his home along the Highway 16 Corridor since 1991 – in Port Edward, Prince Rupert, Terrace, Edmonton, and currently Prince George. Before that, he studied policy and economic at UVic. Tim built a 30-year career in sales, management and marketing, including teaching Services Marketing at UNBC for eight years.