Post on 18-Nov-2014
The Nature of Services
Learning Objectives Classify a service into one of four categories using
the service process matrix. Describe a service using the four dimensions of the
service package. Discuss the managerial implications of the distinctive
characteristics of a service operation. Discuss the insights obtained from a strategic
classification of services. Discuss the role of a service manager from an open-
systems view of service.
Unified Services Theory
“With service processes, the customer provides significant inputs to the production process. With manufacturing processes, groups of customers may contribute ideas to the design of the product, but individual customers’ only participation is to select and consume the output. All managerial themes unique to services are founded in this distinction” Sampson, IJSIM 11:4 (2001).
Unified Service Theory Themes
Service processes are distinguished from non-service processes only by the presence of customer inputs and implications thereof.
For those familiar with business management in general, understanding those additional issues unique to managing services requires only understanding the implications of customer inputs.
Customer inputs are the root cause of the unique issues and challenges of services management.
Sampson and Froehle, POMJ 15:2 (2006)
Unique Characteristics of Services Intangibility: creative advertising, no patent
protection, importance of reputation Perishability: cannot inventory, opportunity loss of
idle capacity, need to match supply with demand Heterogeneity: customer participation in delivery
process results in variability Simultaneity: opportunities for personal selling,
interaction creates customer perceptions of quality Customer Participation in the Service Process:
attention to facility design but opportunities for co-production
A Basic View: Services as a Service/Product Bundle
Element Core Goods
Example
Core Service
Example
Business Custom clothier Business hotel
Core Good/Service Business suits Room for the night
Peripheral
Goods
Garment bag Bath robe
Peripheral
Service
Deferred payment plans
In house restaurant
Variant Coffee lounge Airport shuttle
A More Elaborate View:The Service Package Supporting Facility: The physical resources that must
be in place before a service can be sold. Examples are golf course, ski lift, hospital, airplane.
Facilitating Goods: The material consumed by the buyer or items provided by the consumer. Examples are food items, legal documents, golf
clubs, medical history. Information: Operations data or information that is
provided by the customer to enable efficient and customized service. Examples are patient medical records, seats
available on a flight, customer preferences, location of customer to dispatch a taxi.
The Service Package (cont.) Explicit Services: Benefits readily observable by the
senses. The essential or intrinsic features. Examples are quality of meal, attitude of the
waiter, on-time departure. Implicit Services: Psychological benefits or extrinsic
features which the consumer may sense only vaguely. Examples are privacy of loan office, security of a
well lighted parking lot.
Understanding Service Processes:The Service Process Matrix
Degree of Interaction and Customization Low High
Service Factory: Service Shop: * Airlines * Hospitals Low * Trucking * Auto repair * Hotels * Other repair services * Resorts and recreation Mass Service: Professional Service: * Retailing * Doctors High * Wholesaling * Lawyers * Schools * Accountants
* Retail aspects of * Architects commercial banking
Degree of labor Intensity
Service Process Efficiency and Effectiveness
Customer as Coproducer Front and Back Office Perspectives Service Profit Chain Focus on Internal and
External Customers Quality (perceptions vs expectations) Focus on Both Efficiency and Effectiveness Use IT as Productivity Enabler for Both
Internal and External Customers
Classifying Services Through Structural Positioning Classifications:
The Nature of the Service Act Relationship with Customers Customization and Judgment Nature of Demand and Supply Method of Service Delivery
Why do this? Who can I learn from? How can I differentiate myself?
Strategic Service Classification (Nature of the Service Act)Strategic Service Classification (Nature of the Service Act)
Direct Recipient of the Service
People Things
Nature of the Service Act
Tangible Actions
Services Directed at People’s Bodies:
Healthcare
Passenger transportation
Beauty salons
Exercise clinics
Restaurants
Services Directed at Goods and other Physical Possessions:
Freight transportation
Repair and maintenance
Laundry and dry cleaning
Veterinary care
Intangible Actions
Services Directed at People’s Minds:
Education
Broadcasting
Information Services
Theaters
Museums
Services Directed at Intangible Assets:
Banking
Legal services
Accounting
Securities
Insurance
Strategic Service Classification (Relationship with Customers)Strategic Service Classification (Relationship with Customers)
Type of Relationship between Service Organization and its Customers
“Membership” Relationship No Formal Relationship
Nature of the Service Delivery
Continuous Delivery of Service
Insurance
Telephone subscription
Electric Utility
Banking
Radio station
Police protection
Lighthouse
Public highway
Discrete Transactions
Long-distance phone calls
Theater series tickets
Transit pass
Wholesale buying club
Airline frequent flyer
Toll highway
Pay phone
Movie theater
Public transportation
Restaurant
Strategic Service Classification (Customization and Judgment)Strategic Service Classification (Customization and Judgment)
Extent to which Service Characteristics are Customized
High Low
Extent to which Customer Contact Personnel Exercise Judgment in Meeting Individual Customer Needs
High
Surgery
Taxi service
Gourmet restaurant
Education (large classes)
Preventive health programs
Family restaurants
Low
Telephone service
Hotel services
Retail banking
Cafeteria
Public transportation
Movie theater
Spectator sports
Institutional food service
Strategic Service Classification (Nature of Demand and Supply)Strategic Service Classification (Nature of Demand and Supply)
Extent of Demand Fluctuations over Time
Wide Narrow
Extent to which Supply is Constrained
Peak demand can usually be met without delay
Electricity
Telephone
Hospital maternity unit
Police emergencies
Insurance
Legal services
Banking
Laundry and dry cleaning
Peak demand regularly exceeds capacity
Tax preparation
Passenger transportation
Hotels and motels
Fast food restaurant
Movie theater
Gas station
Strategic Service Classification (Method of Service Delivery)Strategic Service Classification (Method of Service Delivery)
Availability of Service Outlets
Single Site Multiple Site
Nature of Interaction Between Customer and Service Organization
Customer Travels to Service Firm
Theater
Barbershop
Bus service
Fast food chain
Service Provider Travels to Customer
Pest control service
Taxi
Mail delivery
AAA emergency repairs
Transaction is at Arm’s Length
Credit card company
Local TV station
National TV network
Telephone company
Service Operations: An Open Systems View
Service Process Consumer Evaluation Consumer
arrivals Consumer participant departures Criteria
(input) Consumer-Provider ( output) Measurement
interface
Control Monitor
Customer Demand Service Operations Manager Service Personnel
Production function:
Perceived needs Alter Monitor and control process Schedule Empowerment
Location demand Marketing function: supply Training
Interact with consumers Attitudes
Control demand
Modify as necessary
Define standard
Service Package
Supporting facility
Communicate Facilitating goods Basis of
by advertising Explicit services selection
Implicit services
Xpresso Lube’s Service Package Supporting Facility
Facilitating Goods
Information
Explicit Services
Implicit Services
Xpresso Lube’s Distinctive Service Characteristics Intangibility
Perishability
Heterogeneity
Simultaneity
Customer Participation in the Service Process
Xpresso Lube’s Service Classifiction Nature of the service act
Relationship with customers
Customization and judgement
Nature of demand and supply
Method of service delivery
Xpresso Lube Questions
What elements of Xpresso Lube’s location contribute to its success?
Given the example of Xpresso Lube, what other services could be combined to “add value” for the customer?
Topics for Discussion
What are the characteristics of services that will be most appropriate for Internet delivery?
When does collecting information through service membership become an invasion of privacy?
What are some management problems associated with allowing service employees to exercise judgement in meeting customer needs?
What factors are important for a manager to consider when attempting to enhance a service firm’s image?
Interactive Class Exercise
The class will break into five groups and each group will be assigned one of the service classifications (e.g., nature of act, relationship with customer, customization, nature of demand, or method of delivery) to come up with an example for each of the four quadrants in the matrix.