Services are intangible activities that are the main object of a transaction between a buyer and seller. They are probably best described by what they are not: PRODUCTs. Services are the fastest-growing component of the U.S. economy. Approximately two-thirds of U.S. GROSS DOMESTIC PRODUCT is comprised of expenditures for services. Spending on services tends to be higher in developed countries than developing economies (EMERGING MARKETS). Marketers understand that customers make purchase decisions to satisfy needs or wants. Many purchase decisions include both products and services; for example, a restaurant meal is both a product, the meal, and the service provided. In a famous article, marketing professor Theodore Levitt described marketing myopia, the failure of businesses to recognize their full scope. Product orientation rather than customer-benefits orientation endangers an enterprise’s growth. Product orientation can lead to failure to recognize the service component of a firm’s offerings. Services have many unique characteristics requiring different marketing strategies. First, services are intangible; customers usually cannot use their senses to evaluate a service prior to purchase. For example, how can a consumer evaluate a haircut before she has hired the stylist? Because most services are intangible, marketers attempt to demonstrate tangible benefits associated with a service. Services also are often inseparable from the service provider. This is an important consideration in servicepromotion strategy. Most attorneys, accountants, doctors, and other professional-service providers depend heavily on building relationships. Service professionals participate in community organizations, offer pro bono services to nonprofit organizations, frequently offer to be quoted as an expert in local media, and carefully manage their public image. Inseparability of services from the provider results in direct DISTRIBUTION CHANNELs, usually with no market intermediaries. Services also tend to be heterogeneous, meaning they are difficult to standardize. For example, how can one compare realtor services? Heterogeneity can be turned into a strategy to personalize and customize services, which results in price variability. Variation in service quality also presents a challenge to marketers to meet and exceed customer- service expectations. Most services are also perishable. Service businesses generally do not hold inventories; hotel occupancy, for example, is determined daily, and if a room is not rented for the evening, that service opportunity is lost. This leads to last-minute PRICING STRATEGIES, on-line discounting, and alternative SALES PROMOTION efforts. Lastly, services often involve considerable buyer involvement. Accountants need information from clients; hairdressers need preferences from customers; airlines need preferences, schedules, and special-needs information from customers. Because most services are contingent on buyer involvement, service marketers have greater opportunity to develop relationships, anticipate customer needs, and customize marketing mixes. Many service industries are plagued with productivity problems. The inherent nature of services minimizes opportunities for productivity gains. INTERNET technology is providing some efficiency benefits through automation of routine procedures and providing consumers with vast amounts of information. In the process, some service providers, such as travel agents, are facing increasing pressure to demonstrate their service benefits. With an aging population and continued affluence, most service markets will continue to grow in the United States.
See also MARKETING STRATEGY.