In Business, What Does "Intangibility" Mean?

Intangibility in business refers to services, as purchasing them does not result in the actual ownership of something physical. Services are the satisfaction of wants and as such they are not something that can be touched. Service intangibility means that the consumer often has to pay for something before the quality of that thing has been determined. Many times, production and consumption are simultaneous, which in business terms is referred to as inseparability.

Products which are intangible include travel, insurance, consulting, education, and accounting. It is seldom possible to try out these products before purchase and the consumer often relies on brochures, advertising, reputation or hearsay. Services are intangibles and goods are considered as tangibles in the business world but from a marketing perspective, there is a degree of intangibility even in the sale of tangibles. This is very important as once a consumer's trust has been lost, then most times, the provider has lost the customer.

Tangible products can usually be seen, smelled, tasted, touched or tested and these actions are typically carried out before the product is purchased. Until the physical product has been installed, used, eaten or consumed in a myriad of other ways, however, there is still a degree of faith involved in its purchase. This is the intangibility inherent in even tangible things.

The definition of intangibility is quite a complicated one as there are some business assets which are highly valued but difficult to measure. Such assets include brand names, patents, customer service and business processes. Some of these such as patents can be separately identified and sold but brand or business process are difficult or impossible to price and so the selling of them is also difficult. Competitiveness often relies on the quality of intangible assets and services and yet their management is not easy because of the aforementioned reasons.

Intangibility also makes the life of the consumer difficult as there is more pre-purchase uncertainty. The information available is less than for a tangible product and so the amount of perceived risk is higher. One way service providers can decrease consumer anxiety is to work on their reputation for reliability through strategic marketing and word-of-mouth recommendations by satisfied customers. Variability in services needs to be replaced by standardization as much as possible. It has been proposed that this is essential as consumer dissatisfaction can rarely be adequately appeased by a make-up measure.