Services have four unique characteristics that distinguish them from goods. Services are intangible,
inseparable, heterogeneous, and perishable.
The basic difference between services and goods is that services are intangible performances. Because of
their intangibility, they cannot be touched, seen, tasted, heard, or felt in the same manner that goods
can be sensed. Evaluating the quality of services before or even after making a purchase is harder than
evaluating the quality of goods because, compared to goods, services tend to exhibit fewer search
Goods are produced, sold, and then consumed. In contrast, services are often sold, produced, and
consumed at the same time. In other words, their production and consumption are inseparable
activities. This inseparability means that, because consumers must be present during the production of
services like haircuts or surgery, they are actually involved in the production of the services they buy.
That type of consumer involvement is rare in goods manufacturing.
Because services have greater heterogeneity, or variability of inputs and outputs, they tend to be less
standardized and uniform than goods. Because services tend to be labor intensive and production and
consumption are inseparable, consistency and quality control can be hard to achieve.
Perishability refers to the inability of services to be stored, warehoused, or inventoried. Services must be
utilized at the time they are rendered, as opposed to tangible items, which can be manufactured and
kept for later use. Time or service capacity is lost if not used.
5. List the three types of product modifications and give examples.
Quality modification: a change in a product's dependability or durability. Reducing a product's quality
may let the manufacturer lower the price and appeal to target markets unable to afford the original
product. Conversely, increasing quality can help the firm compete with rival firms. Examples include
clothing companies using higher-quality ink or fabric for better quality products that last longer. Or a
furniture manufacturer using a higher-quality wood for building their products to increase durability and
Functional modification: a change in a product's versatility, effectiveness, convenience, or safety.
Examples include a vehicle manufacturer using a higher quality steel for the roll cages in their products
to increase safety precautions. Or a computer company introducing new software for their product that
introduces faster processing speeds.
Style modification: an aesthetic (how the product looks) product change rather than a quality or
functional change. Examples include a vehicle manufacturer changing the style of a vehicle to create a
broader appeal to a new market. Or a clothing company adding different color schemes to their line of
6. List and briefly describe the four major functions of packaging.
The three most important functions of packaging are to contain and protect products; promote
products; and facilitate the storage, use, and convenience of products. A fourth function of packaging
that is becoming increasingly important is to facilitate recycling and reduce environmental damage.
The most obvious function of packaging is to contain products that are liquid, granular, or otherwise
divisible. Packaging also enables manufacturers, wholesalers, and retailers to market products in specific
quantities, such as ounces. Physical protection is another obvious function of packaging. Most products