Intangibility Analysis Essay

Abstract

Experience is living through certain events and impression of the events on persona or animals. Today, experience has become not only psychological phenomenon, but economical term as well, increasingly popular “product” delivered to customers by entertainment industry. Experience is delivered in so-called service product, as opposed to goods. Provision of service is a kind of activity that does not result in ownership and creates benefits by facilitating change in customers, change in their physical property of change in their intangible assets. The current work will discuss features of such service product with elements of “experience for pleasure” as cruise traveling service provided by one of the leading companies in the market, Carnival Cruise Lines. Cruise ship is a unique form of entertainment service. Cruise combine traveling to exotic places, musical theatres, gambling, on-board restaurant and hotel services along with social mixing of passengers. The unusual experience of living shipboard in the open sea is considered an added value. In this way, cruise service is exceedingly complex service system with unusually large number of opportunities for providing both good and bad services. That is why cruise service is very convenient subject of research in regards of experience-related service. The paper studies experiential aspects of cruise service and how it delivers happiness to customers.

Introduction

In economics and marketing, the term “service” denotes non-material equivalent of good. Thus, provision of service is a kind of activity that does not result in ownership, which differentiates it from providing of goods. Service creates benefits by facilitating change in customers, change in their physical property of change in their intangible assets. The main attributes of services are: intangibility, perishability (denoting lost economic opportunity of unsold service time), lack of transportability, lack of homogeneity (difficulty in mass production of services), labor intensity (human factor as the key success factor), demand fluctuations (difficulty in estimation of demand due to its dependency on various factors such as seasons, business cycle, day of time, etc.), buyer involvement (high degree of interaction between service provider and service recipient). The provision of service is different from the provision of goods, while the latter focuses at the final end - delivery certain material objects to the customer and the fact of customer’s entering into possession of these objects, the process of service delivery includes much more aspects such as service culture, atmosphere of service provision, quality, timely delivery, etc (Duffy, Ketchand 1998).

It is important to note that provision of service does not result in ownership and very often does not last long; and therefore in many cases the notion of service is closely connected to the notion of experience.

According to B. Joseph Pine II and James H. Gilmore (1999), experience economy is defined as advanced service economy aimed at selling “mass customization” services like theatre and numerous entertainment services using underlying services and goods as props.

The Columbia encyclopedia defines experience as living through certain events and impression of the events on persona or animals. (The Columbia Encyclopedia 2004) Pine and Gilmore argue (1999) that the business must create a set of memorable events for the customer and that memory on its own creates the product – the so-called ‘experience”. Mere experience business can charge for creating new memory and feeling of happiness through the process of exploration, more advanced service business can charge the value of the “transformation” carried out due to experience, such as educational service may do if it contributes to the value created by the educated person. This is a natural progression in the value that the business added over and above its inputs.

A core argument of experience economy theoretics is influence of technology, competition and increasing customer expectations on services, which nowadays take the form of commodities. Thus, products are placed on continuum from undifferentiated (called commodities) to highly differentiated. As service markets build on goods markets which in turn build on commodities markets, transformation and experience markets build on recently commoditized services, such as Internet bandwidth, consulting help, etc. Thus, service business charges for the activities if performs for the customer, while experience business charges for the feeling the customers receive from engaging the business (Vandermerwe, Rada 1988).

Hence, service product is a kind of offer that creates totally different value from that offered by goods. Service can be based on service provider specialization of certain kind, on satisfaction of essential and common human need, or on entertainment through diversion and recreation (Kivel 2000). The third kind of services, based on entertainments goal, is the subject of current work. In particular, the paper examines such experiential service product as ship cruises and tries to answer the question as what customer demands such services satisfy and how they make people happy. But before proceeding to the particular case of vacation service provider, it is important to define the concept of happiness and what can make people happy in delivery of good services. The problem of happiness has become a subject of vigorous study by many scholars recently, and economists in particular. As James noticed, "How to gain, how to keep, how to recover happiness is in fact for most men at all times the secret motive for all they do" (James 1902, p. 76). Hence, economics is about, or at least should be about individual happiness. (Frey 2005)

According to Robert Darnton (1995), the idea of happiness is imbedded in American culture so deeply, that it has almost become unnoticeable. The pursuit of happiness in America penetrated from science and technology into popular culture, which is a favorite subject of mentality historians. The brightest examples can be seen in Southern California: “perfect” waves, “deep” massage, hot tubs, love clinics and therapy of any imaginable kind including traditional for Hollywood happy endings. This kind of popular culture can be caricatured, but it cannot be easily dismissed, since it spread throughout the entire country and now, over entire world. “Joe Happy”, an image of circle with a smile in it, can be seen anywhere, pasted on windows, painted on posters, not to mention virtual communication culture. Happiness today has not only become a part of culture and general aim of pursuing, it has also become very valuable goods. These days, everyone is selling happiness: pharmaceutical companies, drug dealers, toy companies, Hollywood producers, self-help gurus, and Wald Disney Company, the author and creator of the Happiest Place on Earth (Oswald 1997). Even psychologists join this trading race with their “positive psychology” movement. This is very important to understand in the current work. American society is closely linked to the concept of happiness, happiness has become one of main element of American culture (and American dream accordingly), and what is more important, in American culture, happiness is not accepted as something originating within individual, it is presumed that happiness can be “created” and “purchased” through purchase of certain goods and services. This concept is valid not to American culture only, since this culture and lifestyle becomes increasingly globalized, such attitude is accepted almost everywhere throughout the world. This gives fairly good ground for emergence of “happiness-creating goods and services”. Entertainment services, leisure and vacation services in particularly, are one of the most profiting markets in this regard, since they charge customers for happiness these services create through recreation, exploration, and new positive experience (Robert Epstein 2001).

It is very important to define factors in service provision that create the feeling of happiness. Such factors are most evident in entertainment service sector.

According to Glenn Bassett (1992), entertainment in its most fundamental form requires a bond of basic and vital communication between entertainer and audience. Passive form of entertainment (like television, cinema, watching games) is most compelling involvement for those people who have lost opportunity or capacity to articulate their most argent needs. But entertainment is mush more than that. It is also discovery, learning, acquiring unknown experience, chance to meet life’s opportunities and crises. Bassett argues that entertainment from extrinsic sources contributes to self-discovery and growth, while entertainment from intrinsic sources “is the creation of higher self”. As a service, entertainment stands in line with sorcery. It possesses the power of magic and spiritual enlightenment. The greater share of quality in entertainment service arises from the power to reach deeply into the mind of audience and find a resonance. The best entertainment is that creating a bond of communication which educates and enlightens. Here is the measure of quality of entertainment: it should reach into the heart of those entertained and strike a sympathetic chord. Thus, entertainment possesses features that pertain to the deepest and most endurable measures of service quality success in finding the customer in the deepest of his and her being. Vacation entertainment, cruise ships in particular, has immense potential and numerous means for completing that goal.

Carnival Cruise Lines Service Product

Service product to be examined in current work is ship cruise offers by Carnival Cruise Lines, one of the leading cruise companies on American and global market. Carnival Cruise Lines achieved distinction of “The World’s Most Popular Cruise Vacation” for wide array of high quality cruise vacations for comprehensive prices. The company claims to have the best combination of quality and price which makes it the most popular cruise line. The main mission of the company is to deliver premium vacation services that correspond to various budgets and lifestyles and to ensure enjoyable and fun vacation to the customers. Carnival Cruise Lines operates 21 ships (Holiday, Celebration, Fantasy, Ecstasy, Sensation, Fascination, Imagination, Inspiration, Carnival Destiny, Elation, Paradise, Carnival Spirit, Carnival Miracle, and others) that cruise to various destinations including Bahamas, Caribbean, Canada, the Mexican Riviera, New England, the Panama, Alaska, and Hawaii with majority of cruises ranging from 3 to 7 days.

According to Glenn Bassett (1992), cruise ship is unique form of entertainment service. Cruise combine traveling to exotic places, musical theatres, gambling, on-board restaurant and hotel services along with social mixing of passengers. The unusual experience of living shipboard in the open sea is considered an added value. In this way, cruise service is exceedingly complex service system with unusually large number of opportunities for providing both good and bad services. Though it should be noticed that cruise travels as a service have one distinct advantage over other kinds of services (consulting, healthcare, beauty-care, television, cinema entertainment, etc.) for combination of experience, discovery, entertainment (games, cinema, parties), and other possible services in one single offer (like spa, sport activities, beauty care, etc.)

Thus, besides the major feature of traveling to certain place on-board, dwelling and basic food, Carnival Cruise Lines offers a number of extra-features which make cruise trip a complex offer of multiple services. These features are: on-board activities (floating resorts); Spa carnival service including “Fun Ship” fitness, anti-stress steam-room, sauna and massage, beauty treatments (facials, manicures, loofah treatments, pedicures, hairstyling); entertainment comprising Las-Vegas-Style Shows, bars and nightclubs, casino, Ocean Players Club, Mega Cash ship jackpot; Camp-Carnival for kids with arts, crafts, games, parties, talent shows, storytelling, pool parties, scavenger shows, pizza-making, children play areas, and other services. And that is not the full list of services yet. Carnival Cruise Lines also offers Dream Wedding Packages with either shipboard of island destination weddings, different modes of dining: total-service dining, sophisticated dining, supper club, casual dining, and special children’s menus. Moreover, the provider offer service of group travel, offshore excursions, gifts and services, business meetings, family reunion, and some others.

Upon considering all the services offered, one starts to understand why Carnival Company is a leader in cruise traveling business. It has created a powerful machine of complex services offered in one package for affordable price. Carnival possesses excellent infrastructure for full-fledged living onboard with a set of most various, differentiated services able to satisfy the demands of virtually everyone: young couples, children, aged persons, business persons. Cruise travel is a complex offer that includes multiple activities and experiences. The experience of living on-board and traveling to certain destination is a basic offer with a host of satellite opportunities to expand one’s vision, spend one’s time, entertain and care for one’s health. Another important thing of the product is personalized and customized approach to the customer. This service considerably differs from entertainment service of Disney Land, for instance, where people access automated, uniform means of distraction. Every visitor on ship travel has the opportunity to choose his set of services, format of traveling (the company offers even feature of on-board conferences!), cost, duration and additional features.

Moreover, the quality of maintenance staff also matters in evaluating this kind of service. Therefore, cruise ship is a complex machine where every element is carefully designed and working blameless.

Due to such quality of service, Carnival Cruise Ships receives multiple rewards as number one cruise choice from Southern Living Magazine, AOL Cruise Critic, American Express Travel Service, National Association of Cruise-Oriented Agencies, Porthole Cruise Magazine, World Cruise and Ocean Liner Society, Cruise One, and other agencies.

Current marketing strategies of the product

In definition of current strategies of the service product concerned, it would be appropriate to use 4P’s parameters and integrated marketing communications. 4P’s include product decisions, price decisions, distribution (place) decisions, and promotions decisions.

In what concerns product dimension, it possesses much value as to multiple strong sides, which are the following:

-Established and trusted brand name. Brand of Carnival Cruise Lines emerged in 1972 and has become famous throughout the world. Currently, it is perceived as one of world leaders in cruise industry.

- Functionality of service offered is rather high, since it combines multiple offers and possibilities of recreation compelling to the most different tastes. Service is highly individualized, customized and easily adapts to the needs of the customer.

- High quality of service. Various features of cruise service depend on estimated cost level of the customer, but with any budget, quality of relevant service is very high.

- Unique feature. Original “Fun Ship” concept combining incentive on-board environment and wide variety of all-inclusive facilities and amenities contributed to bringing cruising into the mainstream market of vacation by broadening the offer to wider audience. Since itinerary and port differentiation steadily decreases between major companies, the main marketing focus shift s to the attraction of the ship as a major destination on its own. The innovative concept of “Fun Ship” exemplifies this trend since the offer centers of benefits of ship even more then those of destinations. With “Fin Ships”, carnival has gained large market share by unique, high quality and customized offer. Carnival Cruise Lines continues to redefine the concept of cruising with “Today’s Carnival”, a service mark that defined commitment of the company to enhancing every possible aspect of vacation experience at Fun Ship. Thus, through offering high-quality cruise voyages, the company presents its service as providing customers with “fun” and “happiness”, making it the primary product of the company.

Price Decisions chosen by the company are very successful as well. Carnival Cruise Lines follows competitive pricing strategy, which is characteristic for most of vacation service providers, and strives to constantly decrease prices. Building new ships with high tonnage and increasingly large amount of people available aboard provides economy of scale cost-saving opportunity, and the company constantly works towards introducing more, lager and more adapted to different needs, vessels. It should be noticed that the company pursues very effective and attractive strategy of price differentiation, which means that customers have opportunity to choose length of cruise, included services, etc., for any price level. Also, prices may depend on season, number of people (volume discount pricing) destination and local country market prices. The strategy of all-inclusive prices, where one-time fee includes everything from ship transportation costs to hotel lodgments and excursions (bundling pricing), is very convenient and flexible. Carnival Cruise Lines received numerous awards as best provider of vacation services in regards of in quality and affordability. In fact, 4-day cruise to Nassau starts from $279 per person, which is fairly affordable fee. In overall, pricing strategy of the company is very successful for both company and its customers, it offers flexible pricing scheme with competitive pricing and a number of volume, seasonal, bundling and other discounts.

Besides product and pricing, place and distribution decisions of the company are very strong as well. First of all, the fact that the company covers global vacation market tells a lot. 21 ships of the company operate voyaging to most diverse parts of the globe, including such destinations as Bahamas, Caribbean, Alaska, Mexican Riviera, Hawaii, New England, Canada, Bermuda, and Europe. Admittedly, major destinations of Asia and Africa are missed, and today they also constitute significant interest with American visitors, therefore these global directions are still to be elaborated.

The company has acquired solid distribution channels of its service, which include partnership with multiple tourism services providers around the world. These channels include tourism agencies in American, British, Canadian and European market, municipal providers of ports (like New York City Economic Development Corporation, which hosts premiere cruise lines of Carnival Corporation in Red Hook, Brooklyn), local tourism agencies of voyage destination, excursion agencies, hotels, bars, clubs and restaurants in place of voyage destinations.

The fourth dimension of 4 P’s, promotions decisions, includes wide variety of activities with the aim to communicate to potential customers the benefit of certain service and convince them to use it. Such activities fall into four main groups of promotional tools: advertising, sales promotion, personal selling, and publicity with public relations. In tourism, the most widespread activities are billboards, newspaper ads, and brochures.

Carnival Cruise Lines uses various promotional tools both directly and with partners. The company is a member of exclusive World’s Leading Cruise Lines alliance, which also comprises Holland America Line, Seabourn Cruise Line, Cunard Line, Costa Cruises and Windstar Cruises. Together these members share their commitment to tourism services value and quality, offering vacations convenient to wide array of budgets and lifestyles, and collectively perform some of promotional activities. Thus, being the part of alliance, each company adds to prestige and brand of other participating operators. It is worth saying that all these companies, namely Carnival Cruise Lines, Holland America, Cunard Line, Princess Cruises, Seabourn Cruise Line, Costa Cruises, and Winstar Cruises, are brands belonging to Carnival Corporation, which, preserving authenticity, autonomy and peculiarity of each brand, conducts integrated marketing communications strategy to promote all of the participating companies.

Another partnership used by Carnival Cruise Lines to promote its service includes partnership with Coors brewing Co., leading to production of special “Fun Ship” Coors Light beer which is sold not only in shipboard bars and restaurants, but ashore as well. This agreement promotes two brands simultaneously and expands audience of each brand with audience of the other, making brand positioning stronger for each company. Other partners included in promotional activities are travel agent communities that promote services of Carnival Company after affiliate model. Due to such partnership, Carnival extends its brand extension to untapped markets and enhances its geographical and functional representation. The main marketing communication tools used by Carnival are: advertisement (main advertisement media are print advertising – relevant recreational, family and business magazines and journals; television, radio to a lesser extent, and Internet through banners, paid search engine advertising, website, search engine results and press releases), sales promotions (mainly including incentives to distribution partners), personal selling and direct marketing (main tool – cruise tourism brochures), and public relations, which is by far the most important company’s tool in building brand awareness and company’s image. Public Relations campaign of Carnival Cruise Lines includes virtually all parts of classic public relations, namely publicity, press releases and news releases, featured articles, etc. Due to public relations, the company is accepted as voyage market leader. Its press releases are issued in most famous and popular magazines, journals, newspapers, TV and radio news, and publicity includes multiple actions in partnership with well-established brands, such as “30 anniversary of Fun Ships”, etc. In its promotional activities, the company promotes not only its service, but markets the tourism of many states and countries, like Alaska. Company spends considerable money, $50-70 million on marketing Alaska State, thus becoming the major “tourism partner” and strengthening its brand image locally.

Doubtlessly, such thorough and comprehensive promotional strategy of the company is very beneficial. It represents the company in various media, and builds not only “informative”, advertising-like relations with the public, but strengthens its brand image through interactive communication with public due to various PR activities. Now the company, a flag company of Carnival Corporation, is part of the member of Big Four in $11-billion-a year cruise industry, with Big Four accounting for 85% of the entire cruise traveling market.

There can hardly be found weak point in existing marketing strategy of Carnival Cruise Lines, though recommendations can be made as to further developments of advertising and promotional incentives of the company which is to be described below. The only weak aspect to be mentioned is insufficient utilization of promotional potential given influence and market power of the company in cruise vacation business. This particularly concerns incomplete global geographic representation.

As a whole, the American cruise industry is dynamic and fruitful market with large potential for development. Due to specificity of the service offer and its flexible nature (complexity and high adaptability to various lifestyles and preferences) there still are many market niches to create and to fill and there is much of the market to gain, even for leading companies. Today, cruising still accounts for 2% of the entire leisure service industry, a fact that suggest extraordinary potential for growth. This growth is to be achieved by differentiation of product, lowering service costs, and more active advertising and promotion of service benefits.

Construction of new large and powerful ships, while being important drive for cruise business, in just one of many factors that influences rapid expansion of the industry. Other factors include better product positioning, healthy economy, changing demographics, wider range of cruise departure points and lengths, and introduction of new innovative onboard facilities and amenities. The offers of dining, shore excursions, entertainment and on-board activities have dramatically evolved in cruise industry over the last 20 years and now can compete with the best similar services ashore.

So, the entire cruise industry is on a boom. Besides huge growth potential and complex character of offer, the market is highly lucrative with competition below average, high profit margins, steadily rising sales and excellent financial performances. Not to mention support of US-Flagged Cruise industry by American government aimed at promoting competitiveness of US shipbuilding. All these factors add to multiple prospects for Carnival Cruise Lines to evolve further and gain new markets and customers.

Recommendations on marketing strategies of Carnival Cruise Lines

It is hard to provide recommendations for such successful and complete companies like Carnival Cruise Lines that due to their outstanding marketing strategies established themselves as leaders in global cruise market. However, it is clear that the market is not saturated and there are numerous possibilities for development and attraction of new customers. For the given service, there exist great potential for development and improvement due to its complex structure, flexibility and ability to enhance its set of features. In this, particular attention should be paid to experiential nature of the service product in elaborating marketing and promotional strategies. According to E. Brody (1994), mass communication is increasingly becoming a questionable strategy among business. More weight is attached to more efficient communication systems connected with public relations. There is a trend of emerging large amount of media but they cover progressively fewer mass audience. Mass communication media are getting replaced by specialized publications and channels targeted at limited audience. New emerging media involve Internet participation which distracts users from time traditionally devoted to mass media. Moreover, “one-on-one media” are emerging, where databases have possibility to track customers individually and generate personalized messages. These factors contribute to declining in influence of traditional mass communication means. Brody (1994) argues that human behavior is driven primarily by experience then expectations. While traditional public relations target expectations, experiential factor is shaped by the behavior of the organization and its personnel. While Carnival operates in leisure service business, direct communications between the company and customer are of great value. According to Brody, experience is shaped by the environments that organizations create for customers. Good environment and valuable experience is virtually the main product of leisure business, therefore quality of services delivery should be impeccable.

In this regards, it would be appropriate for the company to pay implement strategy towards customer experience management, experiential marketing and emotion marketing. Customer experience management is "the process of strategically managing a customer's entire experience with a product or a company" (Schmitt 2003, p. 17). The process of customer experience management takes five steps: analyzing the customer’s experiential world (socio-cultural concept and business concept); building the experiential platform (specifying experiential value promise); designing the brand experience; structuring the customer interface (all sorts of dynamic contacts between the company and the customer), and engaging in continuous experiential innovation (everything able to improve customers’ lives and experience) (Anderson, Sullivan 1993).

The element of innovation is very important in current concept. Carnival Cruise Lines is a very successful company in innovation sphere and it should move further to keep the market leadership. Experiential innovation can include expanding itineraries to new places including Asian and African resorts and ports, concluding contracts with local authorities, tourism companies, excursion and hotel business accordingly. Carnival has considerable number of different destinations, but it’s not sufficient for global leader that misses large global markets like Japan, China, India, SAR, etc.

Another “functional” innovation can concern introducing present-day internet technologies on board which will be of help for both teenagers and business people. Nowadays, this option is possible due to satellite connection.

Besides “shades of fun”, like Celebration, Fantasy, Ecstasy, Sensation, Fascination, Imagination, Inspiration (according to names of ships), “shades of cultures” can be introduced as well. This innovation will be appealing for those, who, besides joyful holidays, sea, sun, chic and fun, seeks exotic adventures and new active experience including Safari, Arabic World, Japanese Sakura, Buddhist Temple and others. These innovations directly concern experiential nature of the offered service and will be aimed at experiential discovery of unknown cultures. This offer concerns expanding product decision; in what concerns promotion decisions, this dimension is connected with advertising new offer, establishing local partnership with tourism-connected small businesses of place of destination and building relevant non-American channels of distribution and local promotion. Thus, the company will be concerned with not only delivering American customers to various places, but serving recreational needs of people worldwide.

Another recommendation can concern expanding customer service experience through including learning element and after-service follow-ups. Nowadays, learning element has become very important feature of many services. Modern society wants to gain experience and to learn from everything they encounter with. As mentioned Chip R. Bell (2001), “"Tutor me or lose me" might not yet be the byword of customers, but smartness is a service expectation. We want software that instructs in its application and provides insight into the possibilities. Sure, we want our products to come with assembly instructions, but we also want to know about maintenance, add-on features, and upgrades. What's more, customers expect call center representatives to know about the products, not just how to order them. In fact, most people would rather have a surly expert than a polite idiot.” (Bell 2001, p.48) This important social development can be used for on-board innovations as well. The company can introduce “funny” on-board survival courses, like spending a day in a sailor’s shoes, excursion to technical parts of the ship, yacht courses, etc. The main thing in the concept is to offer customers opportunity to learn something. Follow-up can also be a major tool to enhance learning for customers. Customers should be included in company database and after the trip, receive personal communication not only on new offers, but with information on new countries, sailing and tourism advices, etc. This greatly expands the possibility of personal marketing and creates special bond between the company and the customer, experiential relations.

The list of recommendations is not complete but the main direction of experiential and emotional marketing is clearly visible.

Pros and cons of given recommendations to the industry

The company studied in the current paper is one of leading companies in global tourism business, therefore qualitative changes in its service product or promotional strategies have potential of impacting entire market. First of all, current recommendations will allow companies to compete on global scales. With suggested changes implemented, the companies will be operating not only in “globally local” Western hemisphere between Europe and America, but cover all other parts of the world. They will have possibility to gain new markets, new partnerships, new customers and new offers. Experiential innovation will raise industry benchmark and push all other leading companies to innovate accordingly. The competition should not take place only in the sphere of ships tonnage; it should be about quality of experience, and commitment to providing constantly novel solutions. Also, given recommendations will cultivate customer oriented culture and, what is more important, incite customer experience management.

The implementation of current recommendations will cause much less negative consequences then positive ones. It is not likely to cause small players fold up business, because, small players account for only 15% of entire tourism market, but even with ratio, they have good possibilities for development due to miserable saturation of the market and competition below average level. Financial cost of proposed changes is not higher then that of losses the company will have in case it doesn’t evolve; building new ships and expanding globally is among main objectives in the company, so, financial cost, though considerable, is natural for these strategic goals and will be compensated within short period of time. Service price may increase, but the growth is not likely to be tangible since prices will be noticeable only for new itineraries.

Conclusion

To sustain competitive advantage, the company has to constantly evolve. The market of cruise travels is rather young, poorly saturated and highly dynamic. In such dynamic market there are lots of opportunities for the companies to emerge and to gain “unexplored” market shares. The fact that itineraries of the leading companies are practically uniform doesn’t mean competition should be taken to other spheres; the fact of uniformity creates that unique opportunity to be innovation leader in geographic dimension. The company can keep current volume of customers and sales which will be quite profitable for it but won’t secure the place of global leader. Global leadership needs innovation. By implementing discussed recommendations, the company will not only advantageously position itself against competition, but secure global leadership currently and in the future.

References

Anderson, E. W. and M. Sullivan. 1993, "The antecedents and consequences of customer satisfaction for firms", Marketing Science, vol.12, no 3, pp.125-143.

Bassett, G. 1992, Operations Management for Service Industries: Competing in the Service Era. Quorum Books, Westport, CT.

Bell, C.R. 2001, ‘The Customer Service Experience’, T&D, vol. 55, no 7, pp. 47-52.

Brody, E. 1994, ‘PR Is to Experience What Marketing Is to Expectations’ , Public Relations Quarterly, vol. 39, no 2, pp. 20-31.

Darnton, R. 1995, ‘ The Pursuit of Happiness’, The Wilson Quarterly, vol. 19, no 4, pp 42-51.

Duffy, J.A., Ketchand, A. 1998, ‘Examining the Role of Service Quality in Overall Service Satisfaction’, Journal of Managerial Issues, vol. 10, no 2, pp. 240-262.

Epstein, R. 2001. ‘Happiness Reexamined’, Psychology Today, vol. 434, no 1, pp. 7-11.

Frey, B. 2005. ‘Happiness Research: State and Prospects’, Review of Social Economy, vol. 63, no 2, pp. 207-221.

James, W. 1902, Varieties of Religious Experience, Mentor, New York.

Kivel, B. 2000, ‘Leisure Experience and Identity: What Difference Does Difference Make?’, Journal of Leisure Research, vol. 32, no 1, pp. 79-100.

Oswald, A.J.1997, "Happiness and Economic Performance," Economic Journal, vol.445, no107, pp. 1815-1831.

Pine, P.J, Gilmore, J.H. 1999, The Experience Economy: Work Is Theatre & Every Business a Stage, Harvard Business School Press, Harvard.

Schmitt, B.H. 2003, Customer Experience Management: A Revolutionary Approach to Connecting with Your Customers, Wiley; 1 ed.

The Columbia Encyclopedia, 2004, Sixth Edition, Columbia University Press.

Vandermerwe, S. and Rada, J. 1988, "Servicitization of business: Adding value by adding services", European Management Journal, vol. 6, no. 4, pp.24-31.

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Sample subject:

Marketing

The Four Unique Characteristics of Marketing

The Four Unique Characteristics of Marketing

Exceptions and Implications

In the past, marketing was considered to be predominantly about tangible goods and products. Services were regarded as exceptions to the general marketing, that of tangible goods. In advanced economies services are produced and exchanged more than tangible products. Thus, in the late 1970s the field of services marketing was developed, separating itself from the field of goods marketing (Gummesson, 2007). The main paradigm of services marketing is that services are different from tangible goods. They are distinguished on the basis of four unique characteristics - intangibility, inseparability of production and consumption, heterogeneity, and perishability. These were identified in their most common form in Zeithaml et al.'s (1985) review of the services marketing literature. Although there are other characteristics of services suggested in the literature, these four are the most cited ones (Edvardsson et al., 2005). There is a huge debate concerning the effectiveness of the four unique characteristics in differentiating services from goods. However, they are widely accepted by scholars and marketers as the most important characteristics of services (Wolak et al., 1998). I will now discuss each of the unique characteristics of services, some of the problems that they pose for marketers and some possible marketing solutions.

Intangibility:

Intangibility is considered to be a key characteristic of services and the most important difference between goods and services, from which all other differences emerge (Zeithaml et al., 1985). In comparison to goods that possess physical properties that can be tasted, touched, felt, and seen prior to the consumer's purchase decision, services lack such properties and so they cannot be sensed prior to the purchase. Services are performances rather than objects or things. Thus, they are intangible (Zeithaml et al, 1985). Services entitle the consumer to an experience and this experience cannot result in an ownership (Edgett and Parkinson, 1993). Moreover, services are subjectively evaluated, both before purchase and after consumption (Jobber, 2007). The intangibility of services causes some problems for marketers. For example, services cannot be patented and thus create problems for new product development (Zeithaml et al., 1985). Moreover, they cannot be easily displayed, communicated or priced. This is why marketers often use tangible clues, such as physical facilities or employees, to help customers evaluate the service before purchase (Edgett and Parkinson, 1993). Marketers could also stimulate the use of word-of-mouth communication in order to create a strong organizational image (Zeithaml et al., 1985).

Inseparability:

Inseparability involves the simultaneous production and consumption which characterizes most services. While goods are first produced, then sold and finally consumed, services are often sold, produced and consumed simultaneously (Zeithaml et al., 1985). Thus, production and consumption are inseparable. The customer should be present during the production of many services and play an active role in the service development process (Keh and Pang, 2010). Also, the service provider is involved in the production process and plays a very important role for the satisfaction of the customer. This notion of the inseparability of production and consumption promoted the idea of relationship marketing in services as managing the interaction between the customer and the provider is very important for effective marketing. The selection, training, and rewarding of personnel who are the service providers is very important for achieving high standards of service quality. In addition to this, service providers should also be trained to avoid or manage inter-customer conflicts as the consumption of the service may take place in the presence of other customers who share their experiences (Jobber, 2007).

Heterogeneity:

Heterogeneity reflects the potential for high variability in the output of services (Zeithaml et al., 1985). This is particularly problematic when the service is labor-intensive as its performance and quality vary depending on the producer. Moreover, different quality can be delivered by the same producer depending on the customer, the time and some other factors (Zeithaml et al., 1985). This leads to difficulty in achieving standardization and quality control in services, and results in a greater perceived risk by customers when purchasing services in comparison to purchasing goods (Edgett and Parkinson, 1993). The potential for high variability in service quality emphasizes the need for careful selection, training, and rewarding of staff in service organizations in order to increase consistency and reliability. Evaluation systems should be developed that allow customers to report on their experiences with staff (Zeithaml et al., 1985). Moreover, adopting uniform production procedures and developing internal marketing to promote service quality could lead to greater consistency (Edgett and Parkinson, 1993). The use of reliable equipment and technology rather than human labor could also help in achieving standardization (Jobber, 2007).

Perishability:

Perishability means that services cannot be inventoried and saved for use in the future (Zeithaml et al., 1985). Services are performances that cannot be stored. They should be consumed when they are produced (Edgett and Parkinson, 1993). For example, a hotel room that is not occupied for the day could not be saved and does not generate revenue during that day. If a service is not used when available, then the service capacity is lost (Edgett and Parkinson, 1993). On the other hand, the hotel cannot supply hotel rooms for its customers when it is fully occupied. Thus, the hardest task of services organizations is to match supply and demand (Zeithaml et al., 1985). Sometimes demand exceeds maximum available supply or demand exceeds optimum supply level. Some of the possible strategies to match supply and demand include different pricing according to the peak period, developing non-peak demand, developing reservation systems and complementary services, utilizing part-time employees or third-parties, sharing capacity, preparing in advance for expansion, etc. (Zeithaml et al., 1985).

Exceptions:

The four unique characteristics of services appear to have almost universal and unquestioned approval from the marketing scholars and are repeated in almost all contexts without any discussion of the underlying logic (Vargo and Lusch, 2004). However, these characteristics have not been empirically or theoretically tested. Rather they are based on practical experience and observations (Edvardsson et al., 2005). Moreover, there are a lot of examples that prove that the four unique characteristics of services fail to adequately and uniformly distinguish them from tangible goods (Lovelock and Gummesson, 2004). I will now discuss some of the exceptions to the four characteristics of services.

Intangibility:

Services are characterized by intangibility because they lack physical properties that can be sensed and so they cannot be evaluated before the purchase. Although the concept of intangibility is sometimes useful, it cannot be universally applied to all services during all stages of the service delivery (Lovelock and Gummesson, 2004). For example, some services involve delivering tangible elements. According to Bitner (1992), in addition to the social environment consisting of the service providers and the other customers, service experiences are also surrounded by a built environment, consisting of the appearance of physical facilities, equipment, personnel, and communication materials. One example of a service that involves tangible elements is the hotel service, whose main element - the room - is tangible. Thus, customers can evaluate the hotel room before they pay for the service. They could also evaluate the hotel building, its facilities, the appearance of the employees, their attitude, the other guests of the hotel and so on. Customers could specifically prefer an expensive service evaluated on the basis of the availability of superior tangible elements, such as a more elegant and better equipped hotel room (Lovelock and Gummesson, 2004). Beaven and Scotti (1990) claim that services cannot be intangible because they result in tangible results. There are a lot of services that involve tangible processes and tangible outcomes that customers experience through their senses during the delivery of the service. Staying in a hotel is an experience that could also be sensed through one or more of the customer's five senses. Another example of such service is having a haircut or another beauty treatment. These services result in physical outcomes - new haircut, physical well-being, etc. (Lovelock and Gummesson, 2004). Gummesson (2007) gives an even more serious example, showing the tangibility of some services - having a surgery at the hospital. A lot of services result in tangible outcomes not just for the customers, but also for their possessions. Examples include repair and maintenance services, cleaning and laundry services, etc. They result in tangible outcomes such as a repaired car, a clean house, clean clothes, etc. (Lovelock and Gummesson, 2004).

Inseparability:

Inseparability involves the simultaneous production and consumption which characterizes most services. For a long time inseparability has been considered one of the most defining characteristics of services (Keh and Pang, 2010). However, despite the claim that the production and consumption of services are inseparable processes, there are a lot of services whose production and consumption are not simultaneous. They do not require the presence and the participation of the customer in the service development process (Lovelock and Gummesson, 2004). Such services are freight transportation, warehousing, laundry, cleaning, landscaping, and repair or maintenance of equipment and facilities. These services are performed in the customer's absence as by purchasing them customers avoid on purpose performing or being involved in such tasks. They are willing to pay money to save time and effort and to have a specialist do the task better than they would (Lovelock and Gummesson, 2004). These services are deliberately separated and are produced only in the absence of customers. They are performed either at a different location or sometimes they are scheduled when the customer is not around. Although there may be some initial collaboration between the customer and the service provider when placing the order and paying, the customer is not involved in the production process. Leaving an item or giving instructions to the service provider does not involve participation of the customer in the actual production of the service. Moreover, consumption of the benefits of these services can only appear some time after production has been completed. In some cases, consumption of benefits actually precedes production (Lovelock and Gummesson, 2004). For example, in banking services when a customer pays a bill by writing a check that may not be processed until several days later. There are also other services where customers are often absent during production, such as internet banking, accounting, insurance and research (Keh and Pang, 2010). Other examples can be found in entertainment, educational, and information services. Advances in information technology and telecommunications, such as the Internet, make it possible to separate the customers from the production of many information-based services. For example, services such as home entertainment and self-study education could be pre-recorded for use in a different location and at a different time so the customers do not need to be involved in their production (Lovelock and Gummesson, 2004). All these examples show that for some services the consumption is entirely separable from the production process and so inseparability cannot be considered a distinctive characteristic of all services.

Heterogeneity:

Services are considered heterogeneous mainly because it is difficult to achieve uniform output, especially in labor-intensive services. There is a challenge of establishing standards when there is a variability in behavior and performance among service workers, and even among the same worker with different customers and from day to day. However, this is not the case in machine-intensive services in comparison to labor-intensive services, as the use of equipment and technology eliminates physical factors that cause variations. The use of reliable equipment and technology rather than human labor makes it possible to achieve high degrees of reliability and standardization (Jobber, 2007). Improvements in service quality and automation help in achieving homogeneity in the delivery of services such as freight transportation, house painting, oil changing for cars, dry cleaning of clothes, and warehousing of standardized parts (Lovelock and Gummesson, 2004). Banks have also reduced the heterogeneity of its services by providing automated teller machines. Homogeneity could also be achieved in services, such as entertainment and education. They can be delivered and redelivered many times without variations with the help of prerecorded performances. When a media station such as radio or TV broadcasts a program, it can be delivered in exactly the same way to each member of the audience (Lovelock and Gummesson, 2004). Moreover, there are many standardized services, such as banking and transportation, which represent a strategy of mass customization, in which customers make selections from a variety of customized modules to create the service package that best suits their needs (Vargo and Lusch, 2004). For example, scheduled airline service is highly standardized in design but it offers different customized modules, such as alternative schedules, service to and from different airports, different classes and prices, seat location, and a selection of drinks, food, and other amenities (Lovelock and Gummesson, 2004). Some hotel and restaurant chains also have standard offerings and thus have ensured uniform service and quality for the customers. McDonald's in an example of consistency. Such restaurant chains have standardized preparation procedures and menus and could offer high consistency to their customers all around the world.

Perishability:

Perishability is a characteristic of services, meaning that they cannot be inventoried for future use and that they should be consumed when they are produced. However, there are important exceptions to this characteristic of services. Services could also be inventoried - in machines and buildings (Lovelock and Gummesson, 2004). The automated teller machine is a store of cash. The hotel building is a store of rooms while the restaurant building is a store of tables. These could be stored before purchase or consumption. However, they cannot be stored after production. Services could also be inventoried in knowledge and people (Lovelock and Gummesson, 2004). Educational service is an example of this. Students store the knowledge they gained in university for life. Some information-based services could be inventoried in systems. These are educational, entertainment, information, and religious services (Lovelock and Gummesson, 2004). They could be inventoried by recording the live performances for later reuse through broadcasting or by transforming them into a reusable good in the form of CDs, DVDs, tapes, or other storage media for later resale. In these cases, the producer's output is highly durable and replicable, and the customer can enjoy the performance over and over again. The concept of perishability of services has been even more questioned with the advances in information technology and communications.

Implications:

The four unique characteristics of services have been considered an underlying paradigm of services marketing for many years. However, recently, their validity has been questioned. Scholars claim that these characteristics do not distinguish services from tangible goods (Fisk et al., 2000). As it was shown in the analysis above, these characteristics are not applicable to all services. They apply only to some services. It cannot be said that all services have each of the four characteristics. Thus, these characteristics are not generic. Moreover, many of the services even possess the opposite characteristics - tangibility, separability, homogeneity and durability. Moreover, the field of services marketing has expanded and there have been major changes in the sector, which have blurred its boundaries. The characteristics of services could also be considered outdated due to the development of technology, especially the use of the Internet (Edvardsson et al., 2005). Technology plays a major role in changing the direction of services marketing. It changes the way services are communicated, sold, and delivered (Fisk et al., 2000). For example, replacing human labor by technology, equipment and quality improvement systems has greatly reduced the heterogeneity of services output. The notion of inseparability and perishability of services has also been questioned because of the advanced in technology and communications, such as the Internet and digital video and audio. The findings that the four characteristics of services are not generic to all services and situations have some implications for marketing. Fisk et al. (2000) suggest that maybe it is time to abandon the field of services marketing and integrate it with general marketing. However, the four characteristics of services are still applicable to some service categories and situations. Thus, another option for the development of services marketing is to distinguish among different types of services and not to look at services as a general category. The characteristics could still be applied to some services and situations when they are relevant and useful (Edvardsson et al., 2005). Another option for services marketing is to develop new characteristics of services that completely distinguish services from tangible goods so that the field of services marketing could be preserved and could remain relevant (Fisk et al., 2000). A lot of scholars are trying to achieve this and are searching for a new paradigm of services marketing. Fisk et al. (2000) suggest several preferred directions of services marketing that could be followed. However, the scope and the future of services marketing are still unclear.

The field of services marketing was developed in the late 1970s in order to distinguish marketing of services from general marketing. Until recently, the main idea of services marketing was that services are different from tangible goods. The four unique characteristics of services were widely accepted among scholars and marketers. However, in recent years, some scholars started to question these universal characteristics of service as they have not been empirically or theoretically tested. Moreover, there are so many examples of exceptions to these characteristics that they cannot be generalized to all services and contexts. The concept of the four unique characteristics of services is becoming even more inaccurate with the changes in the field and the advances in technology and communications. Thus, the field of services marketing needs a new paradigm so that it could remain relevant in the future, as well.

Source: Essay UK - http://www.essay.uk.com/free-essays/marketing/the-four-unique-characteristics-of-marketing.php


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