Examine how the difference between goods and services impacts on marketing decisions.

University Degree Business and Administrative studies

ED1662: Introduction to Leisure Marketing Assignment

The aim of this essay is to identify the difference between goods and services. To determine how this affects the marketing decisions which organisations within the leisure sector undertake.

Leisure theory accents that leisure involves an expression of freedom. This can be achieved through leisure goods and services supplied by both the public and the private sector. Resulting in the creation of a leisure market, where suppliers compete to supply the demand of the consumer. The market will therefore need to adapt to provide the consumers with their demands. Arguably marketing will, to some extent, aim to create demands. This is significant to marketers in leisure sector organisations, as the leisure market is constantly changing resulting in a need to be increasingly responsive to survive competitively. Notably both marketers of goods and services will need to watch for shifts between home-based leisure activities and service based leisure activities. In understanding the marketing of leisure it should be taken into consideration that leisure is more satisfying when there is a not a division between production and consumption, for example, making ones own meal or music, in contrast to eating in a restaurant or buying a CD.

In the marketing of leisure a key component to the marketing mix of leisure organisation is the fact that leisure aims to provide choice. The promotional activity of leisure organisation can be defined as ‘an exercise in communications’. Therefore in the marketing of goods and services the organisation will aim to provide awareness of benefits to their potential or current customers.

At the core of the marketing approach to business is the marketing concept (McKitterick, 1957), which holds that the key to achieving organizational goals consists of determining the needs and wants of target markets, and then attempting to satisfy them more effectively and efficiently than competitors (Kotler & Turner, 1989). Thus, the marketing concept combines four elements, namely, taking a market focus, a customer orientation, co-ordinated marketing, and a goal of profitability.

It can be argued that there are strategic implications for both leisure goods and services marketing depending on the target market. Therefore goods and service marketers may adopt different advertising strategies, with the intent to overcome or exploit these differences, specifically in the marketing of service products.

Leisure organisations should be taken into consideration, that the consumer/end user of a good/services might not always be the customer. This is main factor for organisations targeting good/services at children, where typically the parent is making the purchase

Furthermore to understand the impact of the difference betweens good and services a definition of each should be established;

“…a good is an object, a device, a thing; a service is a deed, a performance, an effort...”

There is no single definition of a ‘goods’ product, however goods can be classified and therefore contrasted in the following categories, ‘consumer & industrial goods’ and ‘durable and non-durable goods’. Shostack (1977) developed that the continuum concept, which defined goods primarily according to the dominance of tangibility. Shostack carried out research into Service/Good Analysis. The Service/Good Analysis process is illustrated in Figure 1(see appendices for figures). Since it is the bundle of benefits that customers buy, the researchers first determined a list of those benefits, as consumers perceive them. Then the researchers determined which specific characteristics (or elements} of the service provide each of the identified benefits.

The identified benefits are then classified, as either primarily Service Elements or Goods Elements per the accepted definitions inherent in the continuums shown in Figure 2. Figure 2 corresponds with the four accepted differences between services and goods shown in Figure 1--services are intangible, inseparable from production, heterogeneous, and perishable, where goods are quite the opposite. Figure 2 also shows which of the four services criteria relate most heavily to each continuum based upon the authors’ definitions.

To illustrate with respect to leisure, leisure goods can arguably be in the form of DVDs as there are aimed at consumers who are interested in films & music videos in the comfort of their own home.

Kotler, Chandler, Brown and Adam (1994) defines services as ‘activities, benefits or satisfactions that offered for sale’. Lovelock, Patterson and Walker (1998) offer two further definitions. One suggests services are ‘any act or performance that one party can offer, and one that is essentially intangible and does not result in the ownership of anything…production may or may not be tied to a physical product (p.5). Their second definition states that ‘services are economic activities that provide time, place and form utility, while bringing about a change in, or for, the recipient of the service’.

To expand it is commonly argued that services possess several unique characteristics that differentiate them from goods. In contrasting goods and services, the implications of these characteristics should be taken into account.

There are four characteristics, which can be used to differentiate and contrast the marketing activities, goods from services, intangibility, heterogeneity, perishability and inseparability of production and consumption.

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In contrasting goods and services, intangibility is considered to be the critical distinction from which all other differences arise. Intangibility highlights the reasoning behind marketing services, as services cannot be seen, tasted, felt, heard or smelt before they are purchased. This is significant to advertising leisure, when taking into account that the principal concern of consumers/customers is ‘ease of evaluation’(Hartman and Lindgren, 1993). Hartman and Lindgren argued that a main concern for service advertising should be too overcome this. Notably, in areas of the leisure sector, this has impacted on marketing decisions for instance where companies have offered ‘introductory’ offers to use their facilities or services. An example of this would be LA Fitness, who use an incentive approach to the potential customer, through offering a ‘free day to try the facilities’ with a current member. Furthermore, promote their services through offering a three-month introductory membership at significantly lower price at different times of the year.

In comparison, to services, goods are highly tangible therefore quality can be confidently evaluated prior to the purchase. Whereas services, the item is highly tangible resulting in the difficulty to evaluate the quality prior to purchase. The marketing strategy for goods will be different to services, as the consumer is relatively not restricted to using good within specific time framework. The good is an end product, aimed to be used in the user's own time at their convenience. Therefore this impacts on the marketing decisions as company will need to create a desire for this good within the consumer’s residual leisure time.

Notably, in considering the heterogeneity in comparing goods and services, it can be argued that the goods ‘item’ is highly standardized in contrast to service where the experience may vary from purchase to purchase. This has a significant impact on the marketing decisions of the organisation specifically with services. This is due to fact that the organisation, will wish to advertise the benefits of service yet a level of caution has to be considered as to false advertising. The consumer will be evaluating the quality of the service and therefore if the service has not been marketed to the level of quality it has been advertise as this can lead to negative word of mouth to current/potential consumers.

The characteristic of inseparability enables marketers for goods to research consumers specific wants and needs with regard market research. As the item from pre-production to post- production can be customised to meet the customer’s needs. Notably organisations providing goods can be responsive to the market and produced goods to suit current trends. Mattel are key example of leisure sector, company responding to market trends and customising current goods too appeal to new segments of the market. This was seen in 2000, when the company became the Harry Potter toy licensee producing a wide range of products which could offshoot their marketing strategy from the release of both the books and the films. Specifically, the company took old products and reinvented them to suit the new demand for Harry Potter merchandise, for example Uno the card game was repackaged and sold as the Harry Potter Uno Game.

In contrast, the marketing considerations of inseparability of the service, results in the leisure organisation having to consider how the service item requires high quality customer contact personnel, will affect the construction of the marketing strategy. This is significant to service marketing, where the marketing objectives will be to create a personality or image for the organisation in the consumer’s perception. Notably in the advertising or promotional forms, services organisation shall consider quality cues in the marketing decisions. Evidently, marketers for service should place importance on the contact personnel in the advertising strategy. This is evident in Topshop marketing stratgey although the company predominantly sales leisure goods, they have focus their business on to create a leisure service within retail shopping sector. The company use their employees to their advantage to create a quality service from the moment the consumer enters the shop. The company offers added value services including style advisors who will suggests a range of styles to the consumers and as a result promote a range of the company’s products. Another area of the companies marketing strategy to move the company into the leisure sector has been the concept of lock ins. Through offering late night shopping and obtaining a license for drinking on the premises, the company can promote other its added value service and sell their goods at promotional prices.

As a result, the inseparability characteristic of the leisure service, results in marketing strategies aimed to stimulate word of mouth.

The concept of perishability is a significant contrast between leisure goods and services, and is a key factor in the decision making as to the marketing of both. Leisure goods marketers will consequently take into account the factors that the ‘item’ is easily available in retail stores or shops when needed therefore the ‘item’ can be stored. This has had significant impact on the marketing of leisure goods, as this highlights the competitive edge which organisation need to take into consideration when designing a marketing strategy. Due to fact, that leisure goods have the potential side by side, therefore increasing the consumer choice, thus leisure good marketer will focus on creating a differential advantage in their marketing activities. This can be seen in the marketing strategy of 3G Mobile Phones who have catch on to the expansion of the mobile phone market into leisure good sector. The marketing strategy has focused on highlighting that mobile is significantly different to its competitors as a result has had activity campaign stemming across the internet, television commercial and billboards.

In contrast perishability is a key concern to marketers of leisure services. Consumption of services requires customer involvement. Therefore service consistency is required. However the actually marketing of services will have to take into account that the fact that customers made need to wait in line or make an appointment and main focus of marketing will be the fact that ‘item cannot be stored in inventory’. The phrase ‘Once the plane has taken off, selling the empty seat is virtually impossible!’ illustrates this point. UGC cinemas exemplify the leisure services strategically marketing in response to the impact of perishability. UGC offer the service of the cinema experience, focusing on ensuring that the consumer enjoys all aspect of the experience, which aims to be of a higher quality to competitors.

We firmly believe in bringing our customers closer to film, making cinema more accessible to everyone and developing a unique offer for our customers that sets us apart from the rest.

As a result the company focus use to strategies to ensure each film reaches a high level of capacity. These include focusing on convenience and repeat purchase. Advanced bookings can be made at the consumers nearest cinema or through online booking subsequently this brings the service into the consumers home or work. Additionally UGC cinemas offer the UGC Unlimited card enables the consumer to see as many films as they desire each month on any day and at any time. Notably UGC have used this to enable the company to focus results of market research to offer a cinema experience with a range of personalised services.

Predominantly, in considering the impact of perishability, leisure service managers, will subsequently consider the Concept of Service Capacity. This relates to number of customers, which the organisation can provide the service to. Leisure managers must aim to create a marketing strategy that will lead to smooth demand levels to optimize overall use of capacity.

It can be argued that the marketing decisions in leisure services need to identify the nature and aim of the services. As a result the organisation will need to communicate the performance of the service on both mass levels and personal levels. This can be address through training personnel to convey the spirit, values, and attitudes of the service corporation as apart of the marketing strategy.

Notably there are strategic implications of both leisure goods and services marketing depending on the target market. However, the impact of the difference between the two will be affected by that extent to which goods and services may compliment each other. It some areas of the leisure sector, goods and services may be dependent on each other. This will affect the marketing decisions, as to whether the service and the good are marketed together.

LA Fitness is key example of this situation, as a leisure organisation that provides the service of a private gym and its own sports wear. Therefore the marketing management have to make the decision as to whether to the goods and services separately or not. LA fitness marketing strategy has been to focus primarily on the leisure service, which is provided to members. Through offering a LA miles card scheme, this enables members to collects ‘miles’ as points, which go towards money off services within the clubs. The sports wear goods are marketed as an additional services enabling members to ‘free up’ time for their leisure activity by purchasing their sports wear within the clubs. As a result the company is adding value on to the service, which they provide to their customers.

In contrast the marketing of Stand-Alone Services should be considered, these are services, which do not depend on the retailing of leisure goods. Currently a marketing concern, has been services competing with goods, which has impacted as marketing moves towards focusing on benefits to the consumer be ‘looked after’, to create the luxury experience. This market activity in the leisure sector has increased the number of services competing with other services

A number of the largest areas of economic activity in the leisure sector are eating, tourism and alcohol. As the leisure sector, continues to expand with a marginal number of organisations conducting business on a global scale. The concept of globalisation is key to highlighting the impact of the difference between goods and services. Globalisation is defined as;

“The process that has enabled investment in financial markets to be carried out on an international basis”

Globalisation is more applicable to goods than services with the exception of holidays, where the consumer is moving to the point of production. Typically the production of goods can be moved around and then brought to the customer, in contrast to services where the production has to be where the customer is. Clearly the place ingredient of the marketing mix is a significant consideration of the service for the marketing channel decisions.

This can be clearly shown in the marketing activities of JD Wetherspoons, where the Marketing Mix is key to their strategies. A main part of the companies aim to create a brand image has been the ‘Buildings of Interest’.

“Wetherspoons works closely with planners, residents and in some case English Heritage, to ensure each new pub is built to the highest specification and is an assert to the area”

Through focusing on the place ingredient of the marketing mix, Wetherspoons can ensure their service has a differential quality and is accessible to their users.

In examining the differences between goods and services, the informational/transformational dichotomy model can be considered. The informational/transformational dichotomy model reasons that advertising can be categorised as either informational or transformational. Informational advertising aims to achieve the marketing objectives through providing information in such a way as to inspire confidence in assessing the brand’s merits. Transformational advertising is designed to link experiencing a higher degree of psychological satisfaction with the brand from viewing the advertising.

The significance of this on goods marketing has been argued that advertising on being informational due to tangibility of goods. This is supported by that fact that consumers prefer to visual evaluated goods before purchase. Specifically leisure goods, where consumer will be using the good as apart of their leisure activity. However this is more significant to service marketing due to intangibility of services. Therefore in leisure sector, marketers through reflecting the experience and focusing on the brand can create a strategy that will encourage consumers to use the service as apart of their leisure activities.

In terms of Hefzallah and Maloney’s classification scheme, as goods are more tangible it was deliberate that the structure of leisure goods marketing would be predominantly informative and demonstrative. Through incorporating this in to the marketing strategy makes it easier for the consumer to assess attributes pre-purchase, thereby reducing perceived risk. It can be suggested that is more beneficial for leisure services to market themselves through staged and testimonial structures, due to the fact that these structures provide a tangible image around an otherwise intangible product.

Predominantly in the marketing of leisure services goods and services, the associative and demonstrative structure of advertising is relevant to the marketing of goods, to inform the consumers of the benefits of using the product.

Conclusion

As a general rule, it can be argued that due to differences in the characteristics of goods and services has a significant impact on the marketing decisions within the leisure sector. The characteristics of intangibility, heterogeneity, perishability and inseparability of production and consumption have a significant impact on consumer perception of the good or service being provided. Subsequently the characteristic of tangibility/intangibility has the most significant impact from both the consumer and marketer’s perceptive within the leisure industry.

The marketing for both leisure goods & services aims to encourage active participation in the associated leisure activity. Leisure services are from homogeneous. As a result it can be argued that the different service types within the leisure sector have applied advertising strategies better suited to their characteristics. To summarize advertising strategies within the leisure service sector will vary, depending on the tangibility of the service and the target market.

This essay would support the notion that goods and services marketers in the leisure sector do adopt different marketing strategies, interpretable to some extent by the specific characteristics of services. However it should be taken into consideration, that although the differences between goods and services have a significant impact on the marketing decisions of individual organisations, the target market would predominantly affect the marketing objectives and thus the strategy.

the breweries and that are pretty good for goods providers when looking at pricing strategy cos products like lager is similar so its all in the advertising!

Bibliography

Banks, E et al. (1997) Marketing: An Active Learning Approach. Blackwell Publishers Ltd

Corbae, G et al. (2001) Marketing 2.0 – Strategies for Closer Customer Relationships. Springer

Dibb, S et al. (1997) Marketing: Concepts & Strategies. 4th edition. Houghton Mifflin

Kotler, P. (1971) Marketing Decision Making: A Model Building Approach. Holt, Rinehart and Winston Marketing Series

Kotler, P et al. (1993) Marketing Places: Attracting Investment, Industry and Tourism to Cities, States and Nations. The Free Press

Kotler, P et al. (1994) Marketing: Australia and New Zealand. Houghton Mifflin

Torkildsen, G. (1999) Leisure and Recreation Management. 4th edition. E & FN SPON

Oxford Dictionary of Business

Website

http://www.wlu.ca/~wwwpress/jrls/cjc/BackIssues/19.3/finn.html

http://man3600-01.su01.fsu.edu/CHAP15/tsld005.htm

http://www.mattel.com/about_us/history/default.asp?f=true

http://www.mobiles.co.uk/3-three-3g-mobile-phones.html

http://www.ugccinemas.co.uk/

http://www.shef.ac.uk/~mcn/x/lem6020/week10.htm

http://www.modoris.co.kr/

Appendices

Figure 1: Service/Good Analysis Process

Figure 2: SERVICE/GOOD CONTINUUMS FOR EACH ELEMENT

SERVICES----------------------------------------GOODS

Service Dominant--------------------Good Dominant

[Rathmell (1966) (a general classification)]

Intangible Dominant-------------Tangible Dominant

[Shostack (1977) "Scale of Market Entities" (tangibility)]

High Experience Low Experience

Qualities---------------------------------------Qualities

(heterogeneity/inseparability)

High Credence Low Credence

Qualities--------------------------------------Qualities

(tangibility)

[Zeithaml (1981) "Continuum of Evaluation for Different Types of Products"]

Low Search High Search

Qualities--------------------------------------Qualities

[ Zeithaml, Parasuraman & Berry (1985) (tangibility/inseparability)]

High Divergence---------------------Low Divergence

(High Differentiation) (Low Differentiation)

[ Shostack (1987) (heterogeneity)]

Low Storability-----------------------High Storability

(PERISHABILITY)

G. Torkildsen, Leisure & Recreation Management p452

http://www.wlu.ca/~wwwpress/jrls/cjc/BackIssues/19.3/finn.html

http://man3600-01.su01.fsu.edu/CHAP15/tsld005.htm

Kotler, P., Chandler, P., Brown, L. and Adam, S. 1994, Marketing: Australia and New Zealand p.262

http://www.empgens.com/Pubs/jems/serchar.pdf

http://www.mattel.com/about_us/history/default.asp?f=true

http://www.topshop.co.uk/promostores/tops/index.html?make_live=yes&promo=

http://www.mobiles.co.uk/3-three-3g-mobile-phones.html

http://www.ugccinemas.co.uk/

http://www.lafitness.co.uk/

http://www.shef.ac.uk/~mcn/x/lem6020/week10.htm

Oxford Dictionary of Business p237

http://www.modoris.co.kr/

Examine how the difference between goods and services impacts on marketing decisions.

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