The Four "I"s of Service Products
Millennials have been accused of ruining everything from dinner dates to golf. While it may be laughable to consider their influence on things like napkins and mayonnaise, what is absolutely true is that this largest living adult generation is shifting the economy towards one based more on sharing than consuming. Because of this shift, services are a more significant component of the global economy, having increased more than 200 percent in the last 20 years. Now more than 46 percent of the US gross domestic product (GDP) comes from services, outperforming not only goods, but also business investments, government spending and net exports. And the importance of services to the economy is only projected to further increase.
There are four factors that are unique to providing services:
Intangibility—Services are intangible, which can make them difficult to evaluate and market. That’s why even within the service industry, companies often focus on the tangible elements of their services. The credit card company Capital One is well known for its rewards program, a tangible benefit it provides to customers. And while Southwest airlines may capitalize on its crews’ over the top personalities, the brand also offers low fares and generous baggage allowances to its passengers as incentives.
Inconsistency—We’ve all seen it. A Fiverr ad pops up on your Facebook feed offering some sort of creative freelance service (logo design, proofreading, content writing) for an astronomically low price. You don’t even click it because you can’t imagine what sort of terrible graphic you’d get for five bucks. But on the other hand, there are boutique design firms that charge tens of thousands of dollars for logo work. Why is the pricing SO inconsistent? The pricing is inconsistent because the pricing depends on the people doing the work, and the range is extraordinary. Take the legal field, for example. According to the Scottsdale, Arizona Canterbury Law Group, the average hourly rate for a criminal defense attorney is $300, yet the average “high” rate is $750, while the average “low” rate is only $100. If you were facing criminal charges, who would you want defending you?
Inseparability—One of the most challenging issues with providing a service is that the provider becomes inseparable from the service being provided. In some instances this can be beneficial to the service provider, but in other instances, this can be challenging, especially when the service requires the participation of both the provider and the consumer to co-create value. For example, a travel agent may have planned an excellent vacation itinerary, but if the clients didn’t adequately communicate their interests, limitations, dietary restrictions and other preferences, they may still end up feeling disappointed in their vacation, even though the travel agent planned a great trip.
Inventory—Inventory issues still exist with services, they’re just different. While there are no perishables sitting on the shelf needing to be sold, service providers have to deal with idle production capacity, which is when the service provider is available but there is no demand for the service. The inventory carrying cost is the cost of paying the service provider’s salary, even though they aren’t providing the service at that time. This cost can be mitigated by using a commission-based pay structure or by reducing hours (as is often done at restaurants during “slow” nights).
Some industries—like education, medicine and the arts—are clearly service oriented. But even most producers of goods have service as a supplement to their core offering. So it's important for the majority of businesses to remember the importance of the four I’s of service products, regardless of what they are selling to consumers.
If you’re having trouble figuring out how to market your service-based business, let 360 PSG help. Our experienced team of digital marketers can craft targeted messaging that will help you reach more potential clients and get you more leads. To learn more about our digital marketing services, please contact us.