There are many differences between services and manufactured goods.
Due to the unique nature of services, it is suggested in academic literature that the so-called IHIP attributes are used as the defining characteristics of services to distinguish them from products (Ritala et al., 2013). The IHIP attributes are intangibility, heterogeneity, inseparability of production and consumption, and perishability (e.g. Fitzsimmons & Fitzsimmons, 2011;
Hoffman & Bateson, 1997; Lovelock & Gummesson, 2004; Zeithaml, Parasuraman & Berry, 1985). Figure 2 visualizes a basic separation between services and products. Additionally, it distinguishes between
"traditional" services and knowledge-intensive business services. (Sipilä, 1999, 26) Figure 2. Separation between services and products (Sipilä, 1999, 26).
Intangibility refers to the fact that services are performances, not objects, and therefore they do not have a physical existence (Zeithaml, Parasuraman & Berry, 1985). It has been argued that intangibility is the single most important aspect that differentiates services from products (Zeithaml & Bitner, 2003): it is the major source of differentiation, from which the three other characteristics are derived (Hoffman & Bateson, 1997). Even though services can include some degree of tangible elements, such as sitting in an airline seat or eating a meal during a flight, the service performance itself is still an intangible performance (Lovelock, 1996).
According to Edvardsson, Gustafsson and Roos (2005) there are two ways of looking at heterogeneity. First, the service processes and service providers tend to be heterogeneous between each other (ibid). Secondly, the service production in a given company is considered to be heterogeneous due to variation in its employees and in its customers in terms of their needs and expectations (Edvardsson, Gustafsson & Roos, 2005; Zeithaml & Bitner, 2003). These characteristics exemplify the fact that services do not have a standard outcome, and that the outcomes and their quality differ depending on the specific customer and the service context (Lovelock, 1996).
Perishability distinguishes services from goods in that they cannot be stored or saved in inventories (Hoffman & Bateson, 1997), nor can they be resold or returned (Zeithaml & Bitner, 2003). Because services cannot be stored, they are lost forever if not used (Fitzsimmons & Fitzsimmons, 2011). This creates management challenges for example in the full utilization of service capacity (ibid).
The production and consumption of services is inseparable (Fitzsimmons
& Fitzsimmons, 2011). In more detail, inseparability of production and consumption refers to three issues: the service provider's physical connection to the service that is being produced, the customer's participation in the service production process, and the participation of
other customers in the service production process (Hoffman & Bateson, 1997; Zeithaml & Bitner, 2003).
Even though these four characteristics of services are well-established and widely recognized, they have also been criticized. Already in the 1970's Levitt (1972) argued that there are no service industries, but only industries where service components have a more important role than in others. His view was that service development should not be regarded any differently from product development, and he argued that service production could be developed in a similar manner as product manufacturing. These arguments are the theoretical roots of the concept of productization. Many authors agree with Levitt's views that the conventional differences between products and services are becoming outdated (Bettencourt & Brown, 2013; Santamaría, Nieto & Miles, 2012).
Intangibility has been criticized because services often include some tangible elements to them, such as the room in a hotel (Lovelock &
Gummesson, 2004). In addition, many products are getting more intangible features. For example, foodstuffs are packaged in protective packages that hide the sensory stimuli and e-commerce cuts off buyers from goods in advance of delivery (ibid).
Services can in fact be standardized in many different ways, which has lead to heterogeneity being criticized as a defining characteristic of services (Lovelock & Gummesson, 2004). Standardization of services can occur through IT, such as with internet-based services, through machine-intensive service operations, such as ATMs (Edvardsson, Gustafsson &
Roos, 2005), or by offering the same service to multiple consumers at the same time, as with university lectures (Vargo & Lusch, 2004b). Lovelock and Gummesson (2004, p. 28) conclude that "it is inappropriate to continue to generalize about heterogeneity (or variability) as being a distinctive characteristic that sets all services apart from all goods".
Inseparability has been criticized due to the reason that a large group of separable services exists, which do not involve the customer directly,
which results in the production and consumption of the service taking place separately (Lovelock & Gummesson, 2004). These separable services include among others car repair, goods transportation (Edvardsson, Gustafsson & Roos, 2005) or pre-packed and pre-measured hamburger patties to ensure quality and consistency (Levitt, 1972).
Finally, services can also be stored for example in systems, buildings, machines, knowledge and people (Edvardsson, Gustafsson & Roos, 2005), which contradicts the perishability characteristic of services. The ATM is a store of standardized cash withdrawals (Gummesson, 2000), live performances such as music concerts or educational lectures can be recorded for later use (Lovelock & Gummesson, 2004), and students can internalize their university education thus inventorying the knowledge and skills for later use (Vargo & Lusch, 2004b).
These criticisms form the basis for service development frameworks such as productization and service blueprinting. If services actually were completely intangible, no physical form of them would exist, as proposed by the service blueprinting framework. It would be impossible to standardize services, if they were completely heterogenic with no similarities between service situations. Back-end functions would not matter in the service production process, if the producer of the service and the consumer were entirely inseparable. If services were completely perishable, it would not be possible to gain time-efficiency or cost-efficiency by pre-manufacturing materials, such as hamburger patties or service catalogues.