Pricing of Services

Abstract

Although both are viewed as products, services as intangibles can be distinguished from goods. Intangibility means that services cannot be grasped mentally, cannot be identified physically, but must be experienced for the customer to gain knowledge of with the intent to purchase. Services are not manufactured and shipped to the customer. Rather, services are dominated by experienced qualities and attributes that can be meaningfully evaluated only after purchase and during production-consumption.¹ In combining goods and services into the same product package, goods give tangibility to services (for example, as souvenirs do to entertainment) while services augment goods (as, for instance, customer service does cars).

The process is the product. We say airline when we mean air transportation. We say movie, but mean entertainment services. We say hotel when we mean lodging rental. The use of nouns obscures the fundamental nature of services, which are processes, not objects.

(Marshall McLuhan, Understanding Media (New York: McGraw-Hill, 1964))