SBP 3b: Intangibility Myth

This principle occurs because some people confuse the lack of ownership of the service provider with intangibility (this will be discussed later in SBP: Server-Ownership Perspective)

Perhaps the greatest fallacy authors and academics make about services is that they are intangible, whereas manufacturing is a tangible process. This fallacy is rebuffed by examples such as the following:

• On part of the Toyota auto manufacturing process is to paint the cars coming through the assembly line. This is a manufacturing process and involves paint, equipment, and the car being painted-all tangible elements. Other companies will paint used cars as a service to customers. This auto-painting process also involves paint, equipment, and the car-all tangible elements!

• Stoffers produces TV dinners at manufacturing facilities around the country. This may include cooking chicken and potatoes, and placing the items in packaging. The food, stoves, and packaging are all tangible. KFC (formerly Kentucky Fried Chicken) also involves food, stoves, and packaging, but is considered a service provider.

• Some companies manufacture artificial hips. This involves machining metal parts and injection molding of plastic or vinyl parts-tangible processes. The surgical procedure to install an artificial hip is considered a service, but is extremely tangible, especially from the perspective of the customer.

• Can we say that manufacturing airplanes is more tangible than flying on airplanes? that making snow skies is more tangible than skiing down a hill at a ski resort? that manufacturing a lawn mower is more tangible than having a landscaping company mow your lawn? Is the lawn mower assembly process more tangible than the lawn mowing process? I don't think so.

Why, then, do so many seem to think that services are intangible, and manufacturing tangible? The confusion is not in the tangibility, but in who provides the tangible elements that the customer takes away with them. With manufacturing, the manufacturer provides all of the elements that the customer takes away, since customers provide no inputs to the manufacturing process. (see the Unified Services Theory) With services, many of the tangible elements that the customer takes away with them were already owned by the customer prior to the production process. The auto-painting customer already owned their car, a major tangible element of the service. The KFC employee already owned their stomach. The artificial hip recipient already owned their body. The airline passenger already owned their selves and baggage, etc.

In fact, services are extremely tangible in process and often in output. It is a major Services Management mistake to minimize the importance of the tangible elements, such as the “supporting facility” (where the service takes place) and the “facilitating goods.”

“Facilitating goods” are those physical items, generally manufactured items, that facilitate or make it possible to deliver the service. Sometimes the customer provides facilitating goods, but often they are obtained by the service provider prior to the time the customer demands service. In some cases the customer takes facilitating goods with them, and in others, the company uses the facilitating goods on multiple customers.

Thus, facilitating goods can play a variety of roles in the service production process. In fact, most service involve some facilitating goods. It is essential to pay attention to the role of facilitating goods in services for a number of reasons, including the following:

• The quality of the facilitating goods can be a chief indicator of the quality of service. This is because it is often much easier for customers to judge the quality of physical goods than the quality of action or informational components of the service. For example, why do real estate agents typically drive expensive cars? A customer may not be able to judge the quality of the agent's advice, but might (rightly or wrongly) assume that the fancy car indicates that the agent must be able to know good quality. (If the fancy car is viewed as a supporting facility–described below–the observation is the same.)

• The availability of facilitating goods may define the capacity of production. Even though facilitating goods may represent a relatively small portion of costs of production, their absence can cause serious problems in production. Imagine a law firm that runs out of printer paper. Paper costs only a few dollars per ream, but if they run out they cannot print and deliver documents that represent thousands of dollars of billings.
• Some service industries, most notably retail, have the delivery of facilitating goods as the core focus of the service process. In one sense retail is the tail end of a long manufacturing process, with the purpose of inventorying goods for distribution to customers. In a service sense, retail is a process of exchanging information with customers regarding their needs and available ways of meeting their needs, providing products (facilitating goods) to meet customer needs, and receiving customer payment inputs that are processed by the cashier. The difference between these two senses is that the first focuses on the movement of goods from distributor to customer, whereas the second focuses on the interactions with customers which help to meet their needs through appropriate facilitating goods. In the latter view, we realize that actual delivery of the facilitating goods is just one component of complex exchange process.

In addition to facilitating goods, nearly all services involve a supporting facility, which is the physical structure that provides a setting for service delivery. And, as you would imagine, supporting facilities are extremely tangible!

Much of what we observe about facilitating goods is also true of supporting facilities: Customers often judge overall service quality based on the perceived quality of the supporting facility. The capacity of the supporting facility can be the factor which limits the overall capacity to deliver the service. Supporting facilities differ from facilitating goods in that they are not generally given to customer (although they may be owned by the customers) and they are less likely to be replenished over time.

Carefully consider the tangible nature of service delivery. Supporting facility and facilitating goods can be evaluated by the customer and used for estimating service quality. We must be careful about the tangible aspects of the service production, since they are evidences the customer uses to evaluate the quality of the service.

Is an automobile a good or a service? The question may be whether it is considered a vehicle (tangible) or transportation (intangible)? Is the tangibility of an automobile influenced by whether the customer is driving it or whether a taxi driver is driving it? The answer is no–the automobile is just as tangible in either case, even though the former is considered a good, and the later is considered a service.

Which is more tangible, a plunger or a plumber? A plunger is a device one can purchase to unstop a clogged drain. A plumber is a person who can be hired to unstop a clogged drain. The plunger is a manufactured good. The plumber provides a service. In fact, a plumber may use a plunger to do the job–the plunger is a facilitating good. The plumber's service using a plunger is seen to be just as tangible as a plunger that the customer uses. The difference is not one of tangibility, but one of ownership.

An airplane is very tangible whether it is owned by the airline or by a private individual. The airplane is a supporting facility. The physical condition of plane may be the customers chief indicator safety and perceived quality of air travel. The capacity of the plane limits the capacity to serve, since each customer requires a seat.

Facilitating goods on an airline include tickets and boarding passes, peanuts, magazines, and what some call airline food.

With manufacturing, the product is also quite tangible, although the “value” or “service” we receive from manufactured goods may be considered intangible. In fact, many manufactured goods have almost all of their value in intangible components-music CDs, computer software, books and other published products, etc.. (How much would you pay for a book in an unknown language?) Manufacturers need to carefully manage intangibles as do service providers. (see SBP: Manufacturing in Sheep's Clothing)

1. What is the supporting facility?
2. What are the facilitating goods?
3. What role do they play in the process?

What are the tangible elements of this business. How are they maintained? What are procedures for maintaining the supporting facility? What are the systems for maintaining the replenishment of facilitating goods? How is the quality of the facilitating goods assured?