Product and Service Dichotomy in Marketing

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Introduction

This paper supports the statement “the product/service dichotomy in marketing theory is no longer sustainable.” The present day marketing approach is a result of the many revolutions and changes that come about in marketing as a result of increased competition.

Modern marketing approach emphasizes “cost leadership, differentiation and focus” (Baker and Saren, 2010)
The cost leadership attribute entails the product cost advantage of the product in relation to existing products in the market.

Differentiation emphasizes creation of products with unique qualities that gives it an edge over the other products in the market. Focus on the other hand implies targeting particular market niches either based on age demographics, lifestyle geographic locations or any other appropriate attributes.

Product/Service Dichotomy

Product manufacturers often endeavor to achieve customer fidelity by delivering to them goods that satisfy their needs. This has led to the development of the “product/service mix” as pointed out by Baker and Saren (2010) in this scenario, service as a facet of the mix has continually been growing its importance.

Technology and globalization have played a pivotal role in enabling different service providers reach out to the dispersed customers. Web applications for example, powered by the internet enables service providers to serve customers at any point.

The earlier marketing approaches placed emphasis on the value within the product, which were always produced and distributed to the wider market. Because the value of the product was seen to be within the product, producers did not have to convince the buyer or persuade them the buy the product.

The marketing practice therefore comprised distribution of the products to the “waiting” consumer. The services marketing is said to have come in lime light during the 70s (Schiffman and Kanuk, 2000). The services’ marketing was uniquely packaged to center on individual services and making it different from the traditional goods marketing. There was a visible difference between manufactured goods and services in the sense that goods are tangible and can be felt whereas services are not.

Continuous market dynamics and technological advances have seen manufacturers shift from the old method of manufacturing for a speculated market to a situation where they accurately predict the customers needs and respond to them appropriately.

By addressing the customers’ needs, manufacturers aim at creating customer dependency to their products and are assured of them buying. This process calls for the need to carry out a feasibility study well in advance to establish what the customer needs and then customizing the products to feed the customers’ needs (Baker and Saren, 2010)

Manufacturing companies have come with different ways of customizing products to fit individual needs; this can either be through use of colours that are synonymous to a certain group or tags that can be identified with a target market. The books sector is a good example where customers have widely applied the strategy of “product personalization” by providing them with unique names (Schiffman and Kanuk, 2000).

High levels of competition and technological advancements have consistently pushed manufacturers and service providers into a need to pay more attention to the customer. They have been forced to categorize customers and strive to satisfy each customer’s unique need.

There is a growing “perception that goods and service are similar,” this as pointed out by Lusch and Varg (2006) is as a “result of co-production.” The shift towards the notion that goods and services are similar has led to studies into the need for customer integration. Researchers on the subject-customer integration have often pointed out that the process allows customers to take part in adding value to the products.

Through customer integration, Lusch, and Varg (2006) argues that three levels of serving the customer; “the facilities level, transformation and utilities.” The practice also enhances decision making, value addition and resource utilization.
The support structure for the three levels of service provision is usually founded on the difference between “direct and indirect service provision.”

In this framework, the resources service provision level brings integration when there is an exchange between a company and the customer (Lusch and Varg 2006). The structure also helps in identifying who between the customer and the service company is responsible for the express and circuitous provision of services.

At the decisions level, the support framework indicates that there is a relationship between the company and the customer at the point of making a decision. The value addition stage of value provision on the other hand indicates that customers and service companies collaborate in service provision.

Niche Targeting

Most recent marketing strategies target particular groups of people classified either according to age, gender, social status or job. Marketing attempts directing towards the youth for example are more frequent as a contemporary marketing approach. In this case, the marketing team studies the bahavor of its target market and develops a product that is customized to fit the needs of the chosen niche.

This is common for example with the fashion companies, mobile phone manufacturers and mobile service providers.
Increase in the number of firms engaged in the production of similar goods or provision of similar services is responsible for the increased competition.

Each organization strives to attain levels of competitive advantages over the others. Michael Porter formulated three important strategies which business organizations can use to gain competitive advantage; he points out “cost leadership, differentiation and focus” (Zeithaml, etal., 2005). As the main strategies for attaining competitive advantage. Current marketing strategies seem to have outgrown Porters’ strategies

The modern marketing strategies emphasize the need for market segmentation as opposed to Porters’ three strategies alone. In the old days, price and product sophistication was used as a strategy to create market segments. Product pricing often meant that the product is affordable to a particular group of people by default and not some.

Depending on the level of sophistication, a product would by default of preference to a particular social class. This type of strategy requires a substantial amount of promotional effort which results in a product that serves a narrow market segment rather than the mass market.

The approach to niche marketing in the present day scenario requires inclusion to ensure sustainability. This means the modern approach to niche marketing is more focused to unique abilities and talents among people rather than in the different categories of people.

The unique abilities and skills may lie in the type of technology used by the organization or the unique talents among the organization’s manpower. (Palmer, 1997) points out the strategy that Apple Company has been using to make its i-products stand out of the competition as a typical example of this.

The Dynamics of the Niche Market

Niche markets are often very vibrant and keep on evolving with time. An organization can capture a niche and own it for time and loose it to other competitors in the field with time. Schiffman and Kanuk (2000) points out that shopping malls were niche markets for quite some time, he observes the changes that have occurred since then exposed malls to stiff competition.

The same scenario is said to have happened to watch brands such as; Dual time. Changes in lifestyle, technology taste and preference among consumers contribute to the frequent shifts in the niche market. One would observe that what is considered fashionable within a given niche may not last long as other products keep on being launched into the market.

Goods meant for niche marketing are often tailored to some technology and marketing procedure that fits the desired niche. The market usually begins with a boom but is filled up with competitors with time. This means that if an organization is to focus on niche marketing, then it must develop the most innovative strategies and be ready to continuously evolve and seek new niches for its products.

Focus to a particular niche requires robust support in terms of resource but it does not necessarily translate into large revenue output. It is therefore not advisable for a particular firm to target niche marketing as a sole strategy for its product line.

There is need to diversify into other strategies to cushion the organization from diverse effects of niche marketing incase of poor performance (Zeithaml, etal., 2005). Such an organization must also invest in developing right talents that can formulate and put into operations appropriate strategies to achieve success.

A niche in this case can not be looked at as a marketing strategy, rather it is a process resulting from an organizations’ proficiency in producing products that appeal to a particular group of people (Gilmore, 2003). Attaining sustainability in this course requires continuous innovation both in marketing skills and product development. Inclusive networking and sourcing ideas globally stands out as one of the strategies to successfully run a niche market.

Niche marketing must strive to uniquely package products and invest in efficient manufacturing processes, cost effective distribution channels and adopt different marketing strategies. Technology serves as a major pillar in attaining the mentioned attributes. Technologically supported manufacturing, distribution and marketing helps in cutting down on cost and achieving high profit margins.

Computer aided manufacturing and computer aided design are the key technological tools that have helped in increasing manufacturing precision, reducing wastage and developing goods that suit the customers taste and needs. In supply chain, technological tools such as; RFID and EDI play an important role in speeding up the process and eliminating errors in the supply chain (Pasuraman and Berry, 2004).

Leadership and sustainability in niche market is squarely based on the profitability of the strategy used. In order to attain leadership, there is needs a sound strategy that serves the whole market. This requires that an organization can be able to serve the market with as many products as possible at a minimum cost Pasuraman and Berry (2004) indicates that there is need to pursue “scale, scope and niche in a single business model in order to attain leadership in niche marketing.”

Product/service dichotomy hampers development of marketing strategies

The idea of creating a division between the approaches to service and product marketing makes it hard to develop successful marketing strategies. Marketing of consumer and industrial services ought to be treated as one to allow the use of similar strategies in either. Often those who support the division of the product and services stress on differences in terms of the structure, marketing approach, response to environmental pressure and their markets.

On the other hand, those opposed to this argument feel the dichotomy approach falls short in reality in the sense that; products and service marketing are similar. The only difference as pointed out by Rathmall (1974) could be in terms of the sizes of the companies involved.

Division of marketing for products and services is often used as the platform for developing marketing theory and their application. Here, the dichotomy serves as a guide for developing distinct marketing actions tailored to particular products, enterprises and market divisions.

Service marketing tends to target the final consumer as opposed to industrial product marketing that targets buyers within the supply chain. Probably according to Rathmall (1974) this is what describes the difference between the two as far as marketing entails.

Environment and company size are the main distinctions in product and service dichotomy. Environmental influences which undermine marketing efforts such as infrastructure can be a basis for differences between product and service marketing. Company size dictates the amount of resources available for investing in the marketing. Amount of resources available for marketing puts different platforms as far as marketing of products and services concerns.

The Size of the Firm vs. Marketing Activities

Most small firms often use contemporary marketing approaches building it both on the relational and transactional marketing theories. This brings on the same platform the marketing practice adapted by both small enterprises and the big ones. Traditionally, only the big firms used the transactional and relational marketing theories to develop marketing strategies for their products.

The size of an enterprise plays an important role in the manner in which the enterprise plans its marketing. Often, small enterprises adopt informal type of marketing plans unlike large enterprises which formulate formal marketing plans. Generally, there are several similarities between the informal and formal marketing plans adopted by small and large enterprises.

There are wide similarities between in how the marketing decisions are developed and implemented. The general decision making strategies are used by both the small and large enterprises to develop marketing decisions. Another similarity is exhibited in customer relations duration anticipated by both product and service providers. They all aim at developing a sustainable customer relation, to achieve this; a lot of emphasis is placed on effective customer relations.

Another similarity between small and large enterprises lies in the manner in which they develop and keep their customer contacts. Right from the first transaction with the customer, both large and small enterprises seek to keep the contacts of the customer for purposes of future communication and interaction. Enterprises often have a database of customers to act as a reference to track the customers buying behavior.

Marketing as a process requires an investment to enable logistical procedures and planning. The only difference regarding investment in marketing is reflected in the budget but both the product enterprises and service enterprises must invest in marketing. It has also been noted that both small and large enterprises practice some aspects of traditional marketing.

The problem of using traditional marketing approaches often has been lack of compatibility with the modern environment and customer behavior. Generally, by small enterprises adopting broad marketing strategies, they reduce the marketing distinctions between them and large enterprises.

Small enterprises are continuously emphasizing investment of financial resources, time and effort in the development of personal relationships with the customers and raising their competitive levels in the market. Relational marketing provides an effective strategy for small firms to be as competitive as large firms.

By enhancing the use of traditional marketing strategies, small firms can create a stable base from which they can strengthen their customer relations and be in a better position to compete the large firms.

Planning and performance evaluation is another area that brings out more similarities between large and small enterprises’ marketing strategies. As pointed out earlier, small enterprises adopt a rather informal marketing plan, modern small business managers are increasingly coming to the realization of the need to adopt formal marketing plans to compete effectively with large firms. Another implication from marketing planning is that there is no empirical support of planning to performance in marketing.

Palmer (1997) argues that whether a firm large or small adopts a formal plan, the difference might only be in the structure of the marketing approach but not necessarily in performance. Since evaluation of a marketing plan rates performance, planning may not be a strong factor as such. Firms should rate their marketing performance majorly from the customers’ response as well as their feedback.

Marketing in the Service Industry

Service industries, like industrial companies must constantly revolutionize their marketing strategies to put themselves in strategic positions in relation to the customers. There is in fact a higher need of growth and development in the service industry than in industrial markets.

The major challenge in the service industry as pointed out by Palmer (1997) is the continuous fluctuation of overheads. The service sector became a prominent part of the economy towards the end of the twentieth century and has continued to play an important role in supporting economies.

The sector continues to be a major source of employment, and therefore an excellent need for the services to be looked as importantly as the goods industry. Taking the service industry with the same weight as the goods industry should then be translated to the marketing approaches and strategies applied in both industries.

Distinction of marketing strategies between goods and service industries would mean lead to making ineffective the traditional marketing strategies that have been existence for long. This is because the service industry as indicated earlier is a new venture in the world. Compared to goods industry which has been in existence for several years, with already established marketing strategies, it is important that the service marketing industry.

Service purchase involves dealings which unlike the goods industry do not lead to material ownership. Since the emergence of the services industry, marketing of its products has been continually changing to take the same line as the products industry.

The 4ps model of marketing has often been cited as inadequate in selling services Gronroos (1990) proposes an enrichment factor to this model in order to suit the service industry; “process and the participants should also be added to the list to make it effective as a services marketing tool.

Time and speed are two other important elements of service marketing as pointed out by Palmer (1997) customers always make a repeat order for services from a provider that guarantees maximum effectiveness, efficiency and also delivers to the promise.

The marketing speed is however an element that is controlled solely by the marketers. Services in which speed is important include; the food industry due to its perishable nature, transport service is another sector where speed of service delivery matters a lot.

Integration of Product and Service Marketing

Services do not have tangibility as opposed to goods, goods have evidence. Gronroos (1990) points out that “some pieces of evidence bundled with services can not be categorized as a true element.” However, service evidence as pointed with plays an important role in the fulfillment of the service.

Customers use service evidence to appraise the performance of the service provider. Evidence in the service provision process helps minimize risks and gives the customer more confidence to purchase the service. Besides, evidence also helps to distinguish one service from another.

Providing Evidence in Service Marketing

Dichotomy is often used as evidence by service providers, “the quality of the product that accompanies the service they receive” (Bell, 1973) this includes the cost of equipment used to provide the service. Taking an example of a lodging or restaurant, cheap lodging or restaurant equipment implies poor service and expensive equipments on the other hand translates to classy services. This fact is used to differentiate service providers in terms of quality.

Branding is also used as evidence in service provision. Borden (1965) points out that “service branding makes the product acceptable.” Once a service provider brands a service and runs a campaign to make it popular, customers develop more confidence in the service.

A popular brand develops the customers’ confidence and reduces their perception of underlying financial risks in buying the service. The brand acts as evidence to what the customer can not feel or touch. Customers develop strong confidence in popular brands and buy them with same ease as a visible product.

Branding consists of two stages; primary and secondary. The primary state consists of tangible evidence about the product which as earlier mentions lacks in services. Bell (1973) suggests that “the name of the service provider can be used as a primary brand.” The secondary brand then follows on the description given to the service. Companies distributing strong brands in the markets stand out of the rest because of the brand name.

The environment in which the service is used can also serve as evidence for the service. Marketers can rely on this factor, to market the service as easily as they can to a product. The environment in which a product is used gives an opportunity for a marketer to create a mental picture of the service to the potential buyer. Borden (1965) indicates that a marketer out to create awareness of services provided by an amusement park can use words like “fun filled or enjoyment place” to create a mental picture about the park to the customer.

The marketing message is another sort of evidence marketers in the contemporary world use to convince consumers about the service. Besides the message, customers are also given some incentives to lure them to the service. Mobile phone service providers for example promise free call time or launch a competition in which users of the service stand a chance to win some gifts. This strategy is one of the best that marketers have focused on to convince consumers to use their services.

This is described by Assael (1987) as the “power of communication” in which a market tends to glorify the service to the consumer. Along the same vein, the media has become a prominent tool with which marketers use to spread their service messages to the consumer.

Service structure is another important tool for marketers, service marketers need to create structures which they can use to appeal and convince the customer why he or she should use the service. These structures could be in form of the tools that the service provider uses to deliver the service.

Assael (1987) suggests that an air transport service provider can flaunt to the customer about the best airplanes in the company possession. With this structure, a marketer can make the customer imagine how good it is to use the service. By seeing the best rated airplane for example, a customer can be convinced that the service provided will be classy.

Conclusion

This paper has demonstrated that the product service dichotomy is increasingly loosing popularity in the modern business world. Although seen as a step towards the creation of market segments for products and service. Creating a distinction between products and services for the purposes of marketing is increasingly becoming a thing of the past as market researches continue pouring new approaches to integrate service and product marketing.

References

Assael, H., 1987. Consumer Behavior and Marketing Action. Boston: Kent Publishing Company.

Baker, M. and Saren, M. 2010. Marketing Theory: a Student Text. London: Sage Publications.

Bell, D., 1973. The Coming of the Post-Industrial Society. New York: Basic Books.

Borden, N. H., 1965. The Concept of the Marketing mix. New York: John Wiley & Sons.

Gilmore, A., 2003.Services marketing and management. London: Sage Publications

Gronroos, C., 1990.Services Management and Marketing. New York: Lexington

Lusch, R. F. and Varg, S. L., 2006. Theservice-dominant logic of marketing: dialog, debate, and directions. New York: M. E. Sharpe, Inc.,

Palmer, A., 1997. Principles of Service Marketing.London: McGraw Hill.

Pasuraman, A. and Berry, L. 2004. Marketing Services: Competing Through Quality.New York: Simon & Schuster

Rathmall, J. M., 1974. Marketing in the Service Sector. Massachusetts: Winthrop Publishers, Inc

Schiffman, L. and Kanuk. L. L., 2000. Consumer Behavior. New Jersey: Prentice Hall.

Zeithaml, V. A. etal., 2005. Services Marketing: Integrating Customer Focus across the Firm. London: McGraw-Hill.

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