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Unit 10: Marketing Considerations

Value Pricing Notes

This approach is used where external factors such as recession or increased competition force
companies to provide value products and services to retain sales e.g. value meals at McDonalds
and other fast-food restaurants. Value price means that you get great value for money i.e. the
price that you pay makes you feel that you are getting a lot of product. In many ways it is similar
to economy pricing. One must not make the mistake to think that there is added value in terms
of the product or service. Reducing price does not generally increase value.

10.3.3 Services Marketing

Service industries are quite varied. The government sector, with its courts, employment services,
hospitals, loan agencies, military services, police and fire departments, post office, regulatory
agencies, and schools, is in the service business. The private non-profit sector, with its museums,
charities, churches, colleges, foundations, and hospitals, is in the service business. A good part of
the business sector, with its airlines, banks, computer-service bureaus, hotels, insurance
companies, law firms, management-consulting firms, medical practices, motion-picture
companies, plumbing-repair companies, and real-estate firms, is in the service business. Many
workers in the manufacturing sector, such as the computer operators, accountants, and legal
staff, are really service providers. In fact, they make up a “service factory” providing services to
the “goods factory”. Not only are there traditional service businesses, but also new types keep
popping up to serve the needs of a changing population.

Kotler (1996) defines service as an activity that one party offers another that is essential, intangible
and does not result in the ownership of anything. Its production may or may not be tied to a
physical product. The four main characteristics of service are intangibility, inseparability,
variability and perishability.

Perishability

Perhaps of all the suggested special characteristics of service products, this is one of the most
difficult to appreciate. Why? Services are highly perishable compared to physical products. But
how could, for example, the services of say, an airline be considered to be more perishable than,
say, fresh food and vegetable products?

The reason is that unlike most physical products, many services cannot be stored. For instance,
if an airline does not sell all the seats on a particular flight, then those seats or rather the sales
revenue of filling of them would have carried, has immediately and irreversibly gone.

Intangibility

Physical products in the store are widely displayed for customers to see, feel, touch, weigh or
sniff at before deciding whether or not to buy.

Comparing this with the choice of the service of say, an insurance policy. You cannot touch, see
or smell the products before choosing, although clearly you can make some assessment based
on past experience, word of mouth, or even the location and decor of the insurance office.

Notes The intangible nature of most services gives rise to special problems both for
suppliers and consumers.

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