Services are Different Than Products
Intangible - They cannot be touched, seen, tasted, heard, or felt or stored.
Inseparable - Production and consumption activities are inseparable. Services cannot normally be produced in a centralized location and consumed in decentralized locations
Heterogeneous - Services tend to be less standardized and uniform than products due to their dependence upon the performance of individual employees/individuals
Perishable - Services cannot be stored, warehoused or inventoried. An empty seat in a theatre cannot produce revenue later. Perishability results in discount pricing of services at almost any price greater than their variable costs.
Discussion: General Electric estimates that each $1B sales in gas turbines translates into $2B in service revenue. How does this fact affect their pricing policy? Why are services often more profitable than products?