Why do you keep referring to “Products and Services”??

Are  “Products and Services” actually different?

Contrary to the nonsense* preached by G Lynn Shostack (VP of Citibank in the US during the 1980’s Bill) – all Products are BOTH goods and services. Impossible (logically) to have one without the other.

* Breaking Free from Product. Marketing. Service marketing, to be effective and successful, requires a mirror-opposite view of conventional …. She just didn’t understand what a product is. Even since then, the definition of Product has been “.. everything, including people, things, services….” She really stuffed up a lot of peoples thinking and effective practise.

Buyers buy the service – the intangibles. The tangibles only provide the vehicle for the services

Service (which includes that well known intangible – “benefits”) is actually easier to Promote.

Economists have never felt the need to say “and Services” everytime someone says “Products” Its just marketers who have been trained like Skinners pigeons.

Are services different (?)

Services were never previously considered different until the view developed around the work of G. Lynne Shostack who produced an article in 1977 “Breaking Free from Product Marketing”.  The article presented the view that services are significantly different from products.  It suggested that the practice of marketing of services using the framework developed for tangible products (goods) has limited thinking about services marketing.

Until that time, if you wanted to make some differentiation between tangible based products and intangible based products you used the accepted “goods and services”.

GSContintuum

Shostack [1] argued that services’ marketing requires a different approach and different concepts compared with goods’ marketing.  She developed a model called the ‘Product-Service Continuum’

Figure 1 The Product-Service or Tangible – Intangible Continuum

This model suggests that there are two opposite and distinct points on a continuum of value offers – Pure Intangibles (services) and Pure Tangibles (goods).

Despite its apparent limitations of logic –  this model is still widely in use.  It is hard to understand how any product can exist without a combination of both tangibles (goods) and intangibles (labour and services).  Using the above model, the concept that salt is pure product does not address service activities (such as marketing – packaging, labelling, distribution, branding, promotion) that are required to offer it as a saleable product.  The same is true of “pure service” like the haircut which requires goods and other tangibles (scissors, salon hairdresser) to the make the service available.  How could a service be exchanged without some form of tangibility?  None the less many writers want to persist with this concept, although most now agree that the bulk of value offers are a combination of both.  Nor does the Shostack concept have any support in standard economic theory.

The more modern view

More recent writers (for example Christian Gronroos and Edvard Gummerson) question the validity and practicality of the previous attempts at goods/services differentiation.

Christian Gronroos [2]  believes that traditional services marketing has little to offer organisations even in the service sector and that the view of services as something provided only by a certain type of organisation is probably an outdated one, which limits understanding and usefulness. It gives the wrong signal about the importance of services in all situations and about the impact of services competitiveness.

Edvard Gummerson[3] states “there is no practical advantage in continuing to try to define services in a separate way”

I [4] suggested in 1995 that all products are essentially services provided with tangibles to affect the delivery of value.

The basis of this chapter is that the main benefits (from a buyer/user perspective) of any product are the intangible ones – services the product provides or services attached to the product.   These provide the satisfaction and value sought in the marketing exchange.  Basically what the tangible product factors provide is the vehicle for the intangible satisfactions.

All products are largely service (intangible value) based

It seems logical that services are not something different or separate from a product or a different class of products.  Customers do not buy products or services – (goods or services); they buy the entire value offer the (mostly intangible) benefits all products provide them with.’ They buy offerings consisting of goods, services, information, image, personal attention and other components. Such offerings provide benefits by way of services to them.  It is this customer-perceived benefit/service of an offering that creates value for buyers and users.   In the final analysis organisations always offer a service to customers, regardless of what they produce. (Gronroos [5])

The value of goods and services to customers is produced both in factories and in the back offices of service organisations, in service delivery encounters as well as when users make use of the product they have purchased.

It is essentially impossible to provide or receive something of value without some tangible element involved, eg labor, packaging, equipment. Consider an advice based service, financial planning, legal advice, insurance quote, no physical object changes hands. For financial and legal advice the service provider had to undergo training to gain the necessary qualification, then had to research the specific needs of the consumer (labour), and may even provide the consumer with a typed report. Often when consulting an expert for advice a consumer would visit the firms premises (capital/land/building), sit on a chair in a meeting or waiting room (equipment).

No tangible product changes hands between the producer and consumer, however tangible factors of production, land, labor, equipment are involved and used by the consumer.


[1] Shostack, G.L.  Breaking Free from Product Marketing. American Marketing Association.   Journal of Marketing, April 1977

[2] Gronroos. (1989a): Defining Marketing: A Market-Oriented Approach.  European Journal of Marketing, No. 1

[3]  Gummerson (1990): Organizing for Marketing and Marketing Organisations.  In Congram, C.A. & Friedman, M.L., eds., Handbook of Services Marketing.  New York: AMACON

[4] Monger, B., (1995) Service as the Product; Marketing World  London

[5]  Gronroos C., Service Management and Marketing.  Wiley 2000

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5 thoughts on “Why do you keep referring to “Products and Services”??

  1. A good friend of mine suggested I might like this blog. He was entirely right. This post truly made my day. You can not imagine simply how much time I had spent for this information! Thanks!

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  3. While I understand your point of view I think you have missed the importance of the significant difference between products and services in that a service does not yield physical ownership of a tangible good. You are also not giving Shostack enough credit for recognising that virtually all offerings do contain tangible and intangible elements. The molecular model ably demonstrates this.

    • Eamon. The point I think youy miss is why people buy (acquire) things. It is not to have physical possession (the physical aspect, the good) – it is to acquire the benefits they provide. Thus do I acquire the service provided by the ATM, the hairdresser? I think I do because I get the benefit of the service, the action, that activity.

      Shostack certainly thought that most products contain both tangibles and intangibles – but also created a continuum that says there are pure “Products” and pure services. This is if nothing else a logical impossibility. Without tangibles (usually at very least people), how is a product exchanged? A Haircut requires a hairdresser, tools etc. All products have both elements. The important thing for marketers that the Shostack model did not understand is that people buy a Product (defined in Economics, way before Shostack, as being both goods and services) is for the benefits not the “bits”. Every sales person knows that what people buy are benefits – not feature. The features (the tangibles) are there to carry, transport, the desired benefits. It is really only misguided marketers who have just accepted the Shostack model who don’t seem to grasp that basic marketing fact.

      The purpose of my statements and the article is not just semantic. It is to have marketers think (more) about the model and to probably be able to do a better job.

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