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Services have a number of distinctive characteristics which differentiate them from goods and have implications on the manner in which these services are marketed.

Intangibility

A pure service cannot be assessed using any of the physical senses and cannot be directly examined before it is purchased. A prospective purchaser of most goods is able to examine the goods for physical integrity, aesthetic appearance, taste, smell etc. Advertising claims relating to these tangible properties can be verified by inspection prior to purchase. On the other hand, pure services have no tangible properties which can be used by consumers to verify advertising claims before the purchase is made. The intangible process characteristics which define services, such as reliability, personal care, attentiveness of staff, their friendliness, can only be verified once a service has been purchased and consumed.

The level of tangibility present in the service offer derives from 3 principal sources:

• Tangible goods which are included in the service offer and consumed by the user.
  Where goods form an important component of a service offer, many of the practices associated with conventional goods marketing can be applied to this part of the service offer. The presence of a tangible component gives the customers a visible basis on which to judge quality.
• The physical environment in which the service production/consumption process takes place.
  Within this environment, the design of buildings, their cleanliness and the appearance of staff present important tangible evidence which may be the only basis on which a buyer is able to differentiate one service provider from another. While some services are rich in such tangible cues (e.g. restaurants, shops), other services provide relatively little tangible evidence (e.g. life insurance).
• Tangible evidence of service performance.
  Some services provide many opportunities for customers to see the process of production (for some services, that could be the whole purpose of service, e.g. pop concert). Often this tangible evidence can be seen before a decision to purchase a service is made, either by direct observation of a service being performed on somebody else, or indirectly through a description of the service production process. On the other hand, some services provide very few tangible cues about the nature of the service production process. E.g. portfolio management services are not only produced largely out of sight for the consumer, it is also difficult to specify in advance in a brochure what the service outcomes will be.

The intangibility of services leads to customers:

1. Having difficulty in evaluating competing services
2. Perceiving high levels of risk
3. Placing great emphasis on personal information sources
4. Using price as a basis for assessing quality

This results in management response through:

1. Reducing service complexity
2. Stressing tangible cues
3. Facilitating word-of-mouth recommendation
4. Focusing on service quality

Inseparability

The production and consumption of a tangible good are two discrete activities. Companies usually produce goods in one central location and then transport them to the place where customers most want to buy them. On the other hand, the consumption of a service is said to be inseparable from the production of the service itself. Producer and consumer must interact in order for the benefits of the service to be realized. Both must normally meet at a time and a place which is mutually convenient in order for the producer to directly pass on the service benefits. This is termed as the co-production of services. For services, marketing becomes a means of facilitating complex producer-consumer interaction, rather than being merely an exchange medium.

In the cases of goods, the consumer is not a part of the process of production and in general, so long as the product is delivered and meets their expectations, they are satisfied. With services, the active participation of the customer in the production process makes this as important as defining the end benefit. In some cases, an apparent slight change in the service production method may totally destroy the value of the service being provided.

Hence, inseparability of services leads to customers:

1. Being co-producers of the service
2. Often being co-consumers of a service with other consumers
3. Often having to travel to the point service production

This results in management response through:

1. Attempts to separate production and consumption
2. Management of consumer-producer interaction
3. Improvement in service-delivery systems

Variability

For services, variability impacts upon customers not just in terms of outcomes but also in terms of process production. It is the latter point that causes variability to pose a much greater problem for services, compared to goods. Because the customer is usually involved in the production process of a service at the same time as they consume it, it can be difficult to carry out monitoring and control to ensure consistent standards. The opportunity for pre-delivery inspection and rejection which is open to the goods manufacturer is not normally possible with services. The service must be normally produced in the presence of the customer without the possibility of intervening quality control. Particular problems can occur when personnel are involved in providing services on a one-to-one basis–such as hairdressing–where no easy method of monitoring and control is possible.

There are two dimensions of variability which are relevant to services:

• The extent to which production standards vary from a norm, both in terms of outcomes and of production processes.
  Variability in production standards is of greatest concern to service organizations where customers are highly involved in the production process, especially where the production methods make it impractical to monitor service production. This is especially true for many labor-intensive personal services provided in a one-to-one situation. Some services allow greater scope for quality control checks to be undertaken during the production process, allowing an organization to provide a consistently high level of service. This is especially true of machine-based services.
  The tendency today is for equipment-based services to be regarded as less variable than those which involve a high degree of personal intervention in the production process. Many service organizations have sought to reduce variability and hence to build strong brands by adopting equipment-based production methods. Replacing human telephone operators with computerized voice systems and automating many banking services are typical of this trend. Sometimes reduced personnel variability has been achieved by passing on part of the production process to consumers, such as self-service petrol filling stations are no longer dependent on the variability of forecourt servicing staff.
• The extent to which a service can be deliberately varied to meet the specific needs of individual customers.
  Because services are created as they are consumed, and because consumers are often a part of the production process, the potential for customization of services is generally greater than for manufactured goods. The extent to which a service can be customized is dependent upon the production methods employed. Services which are produced for large number of customers simultaneously may offer little scope for individual customization.
  The extent to which services can be customized is partly a function of management decisions on the level of authority to be delegated to front-line service personnel. While some service operators seek to give more authority to front-line staff, the tendency is for service firms to "industrialize" their encounter with customers. This implies following clearly specified standardized procedures in each encounter. While industrialization often reduces the flexibility of producers to meet customers’ needs, it also has the effect of reducing variability of processes and outcomes.

The variability of service output can pose problems for brand building in services compared to tangible goods. For the latter, it is usually relatively easy to incorporate monitoring and quality control procedures into the production processes in order to ensure that a brand stands for a consistency of output. In some cases, service offers have been simplified, jobs have been "deskilled" and personnel replaced with machines in order to reduce human variability.

To conclude, variability of services is caused by:

1. Services being produced "live"
2. Little or no chance to correct mistakes before consumption
3. Reliance on fallible human inputs
4. Difficulty to "blueprint" service process

This results in:

1. High levels of perceived risk for buyers
2. Difficulty in presenting an image of consistent quality
3. Difficulty in developing strong brand

Perishability

Services differ from goods in that they cannot be stored. The producer of a service which cannot sell all of its output produced in the current period gets no chance to carry it forward for sale in a subsequent period. For example, an airline which cannot sell all its seats in its 9am flight from Paris to London cannot sell any the empty seats once the aircraft has left the airport at 9am. The service offer disappears and spare seats cannot be stored to meet a surge in demand which may occur at 10am.

Very few services face a constant pattern of demand through time. Many show considerable variation, which could be a daily variation, weekly, seasonal, cyclical or an unpredictable pattern of demand.

The perishability of services results in greater attention to be paid to the management of demand by evening out peaks and troughs in demand and in scheduling service production to follow this pattern as far as possible. Pricing and promotion are two of the tools commonly adopted to tackle this problem.

In short, service perishability is caused by:

1. Inability to store services
2. Short-term supply inelasticity

This results in:

1. Problems where demand pattern is irregular
2. Requirement for "just-in-time" production of services
3. If not managed effectively, congestion occurs at peak periods and unused capacity at off-peak periods

Ownership

The inability of own a service is related to the characteristics of intangibility and perishabilty. In purchasing goods, buyers usually acquire title to the goods in question, and can subsequently do as they wish with them. When a service is performed, no ownership is transferred from the seller to the buyer. The buyer is merely buying the right to a service process such as the use of a car park or a solicitor’s time. A distinction should be drawn between the inability to own the service act, and the rights which a buyer may acquire to have a service carried at some time in the future (such as a theatre gift voucher).

The inability to own a service has implications for the design of distribution channels, so a wholesaler or retailer cannot take title, as in the case with goods. Instead, direct distribution methods are more common and where intermediaries are used, they generally act as a co-producer with the service provider.