Understanding_Services__Separate_Field_of_Study_

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Index1. Understanding Services

2. Understanding Services (Intuitive

Notion)

3. Formal definition of Services

4. Services Characteristics different

from Physical Goods

5. List of Special Elements

6. Service Characterisation

7. The Flower of Service

8. Molecular Model9. Shostacks Molecular Model

10. Tangibility Spectrum (Service

Categorisation)

11. Tangibility Spectrum

12. Process Based Categorisation

13. Service Magt. System

14. Service System Customer

Perspective


Perspective contd.


Perspective contd.17. Service System Customer

Perspective contd.

18. Management of People in

Services

19. Differences in Managing20. Management of Customer / other

Customer

21. Magt. Of Channels

22. 7P concept of Services Magt.


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Understanding Services (Separate Field of Study)

We keep hearing about services & Service industries day in & day out. In some ways we

are most of the time either recipient or giver of service & may be or not, based onmonetary exchange.

Till 1970s Service Magt. remained in background playing a subservient role to

manufacturing. Magt. of Services rarely got attention as a field of study separately.

However, from late 70s and early 80s more & more Services started getting attached to

Manufactured Goods as a source of differentiation & as time progressed manypredominantly service oriented services viz. Hotels, Airlines, etc. came of their own and

created management Dilemma for managers calling for separate academic studies &

practice of Service Magt.

Another compelling reason for its separate study/practice was the enormous contribution

service sector made to GDP contribution & employment generation in all countries thus

becoming an economic necessity.

In developed countries like US, UK, etc. the contribution of services to GDP/Employment

has gone up to 80% & more.

In India it is nearly 60% & increasing year after year.


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Understanding Services (Intuitive Notion)

At this stage it will be worthwhile to analyze (i) What are services & (ii) Why its

management including marketing calls for a separate stream of study.

Intuitive Notion :-

Our common daily experience of life suggests that whenever somebody is

performing an act whose benefit we are experiencing, we say we are

receiving A service e.g.;

a) A Barber in haircutting saloon cutting / shaping (Act of) our hair alongwith Soft/Deft touches & good words, has given us a good hair cutting

service.

b) A cashier in bank accepting our cheque at the counter, checking our

balance & giving us cash with notes of our desired denomination has

given us good banking service at the counter.

Likewise countless incidents of performance of one or more person leading to

an experience of receipt of something of satisfaction, feeling of wellness, joy

or convenience is service delivered.

However pertinent point to note is exchange is a product of intangible nature

(experience) rather than a tangible physical entity.


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Formal Definition of Services

Services are deeds, processes & performances.

(Zeithaml & Bitner)

Includes all economic activity whose output is not a physical

product or consideration.

Is generally consumed at the time it is produced.

Provides added value in forms e.g. convenience, amusement,

timeliness, comfort or health.

Stress essentially intangible concerns of first purchaser.

(Quinn, Baruch & Paquette)


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Services Characteristics different from Physical Goods

Services Goods Resulting Implications

1 Intangible Tangible Services cannot be inventoried/ Stored.

Cannot be easily

communicated / displayed.

2 Variability

(Heterogeneous)

Standardized Service Quality

Maintenance - Problem AreaEmployee Action Crucial

3 Simultaneous

Production /

Consumption

Production Separate from

Consumption

Customer is a part of

production process, so are

other customers,

employees delivering service

could affect production process

& Quality

4 Perishability Non-Perishable Difficult to synchronize supply /

demand cannot be stored /

returned & resold.


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List of Special Elements

Necessiting a different Management approach to services:-

PHYSICAL PRODUCTS SERVICES(i) Product is concrete & visible Physical

entity

Is Intangible & experiential in nature.

(ii) Ownership of product is transferred in

buying & consuming.

No ownership transfer. Output is felt leading

to satisfaction or vice versa.

(iii) Product can be resold. Service cannot be resold

(iv) Product can be demonstrated or tasted as

the case is

Cannot be usually effectively demonstrated

(v) Can be stored (related to iv) Cannot be stored

(vi) Consumption is preceded by Production Production / Consumption is simultaneous

(vii) Product can be transported Service Product cannot be transported,

though Producer can move to consumer

(viii) Can be exported Service cannot be normally exported though

service delivery system can move(ix) Producer / Seller Produces Here along with Producer or Seller, the buyer

or client also becomes part of production

(x) Time factor not of much consequence Time factor adds value for recipient in over

all experience of service delivery

(xi) Other people don't matter Other people are part of production

(xii) Intangible elements are not important Intangible elements dominate value creation


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Service Categorisation

(i) Service Industries have Service Products of Two types:-

(a) A Physical Product at the core augmented & surrounded by Service

elements (Supplementary) viz. an Automobile.

(b) A Service at the core surrounded by Service elements viz. Teaching,

Consulting, etc.

Note: A service Product is a mix of tangible & intangible elements. (Also refer to

molecular models & tangibility Spectrum slides)

(ii) C. Lovelock gave an illustrative model visualising all supplementary service

elements. Around a Physical Product or Service as core & called it a Flower ofService.

Note: See next slide for Flower of Service


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The Flower of Service: Core Product Surrounded by

Cluster of Supplementary Services

CORE

Information

Consultation

OrderTaking

Hospitality

Safekeeping

Payment

Billing

Exceptions


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Molecular Model

Another way to describe a Service Industry is breaking it into Tangible & Intangibleactivities providing interconnection between them as integrated values (By

SHOSTACK). See the next slide.


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Shostacks Molecular Model: PassengerAirline Service

Transport

Vehicle

Inflight

ServicesPre & Post

flight

Service

Service

Frequency

Food

&Drink

Price

Marketing Positioning

(weighted toward evidence)

Price

Key

Tangible Elements

Intangible Elements


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Tangibility Spectrum (Service Categorisation)

(a) Earlier presentations are indicative of the fact that there is nothing like a Pure

Service or a Pure Product. This poses a dilemma as to how we categorise a

service, distinct from a Physical Product (also called Goods ) organisation.

Solution to this dilemma was provided by Lynshostack through a model called

Tangibility Spectrum. In this model products were categorised based on how much

of it has Tangible or Intangible elements. And a thumb rule was given that if

Tangible elements are dominant i.e. more the 50% then it should be considered a

Physical Product & vice versa. This has implications in managing a service

system.

(b) Tangibility Spectrum.


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12

Tangibility Spectrum

Fast -FoodOutlets Advertising

Agencies Airlines

Investmentmanagement

Consulting

Teaching

Fast -FoodOutlets

Cosmetics

Automobiles

DetergentsSoftDrinks

Salt

Tangible

Dominant

Intangible

Dominant

Source : G. Lynn Shostack, Breaking Free from Product Marketing Journal of Marketing,

41 (April 1977): 73-80. Reprinted with permission of American Marketing Association.


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Process Based Categorisation

(By CLovelock) a very Practical & Useful categorisation

Who or what is the Direct Recipient of Service

WHAT IS THENATURE OF

SERVICEACT?

PEOPLEPeople Processing

(Service Directed at People

Bodies)

POSSESSIONSPossession Processing

(Services Directed at Physical

Possession)

TANGIBLEACTIONS

Passenger Transport, Health

Care, Beauty Saloons, Physical

Therapy, Fitness Centre,Restaurants, Bars, Hair Cutting

Saloons, Funeral Services

Freight, Transport, repair &

maintenance, warehousing /

storage, Off. Cleaning Services,Retailing, laundry & dry cleaning,

refueling, landscaping/ gardening,

disposal / recycling.

INTANGIBLE

ACTIONS

MENTAL STIMULUS

PROCESSING (SERVICES

DIRECTED AT PEOPLES MIND)Arts / Entertainment, Broadcasting

/ Cable, management, consulting,

education, information services,

music concerts, psychotherapy,

religion, voice, telephone.

INFORMATION PROCESSING

(SERVICES DIRECTED AT

INTANGIBLE ASSETS)Accounting, Banking, Insurance,

Legal Services, Programming,

Research Securities, Investment,

Software Consulting, Data

Processing.

Note : Services are enormous in their variety with sometimes major or sometimes minor in

operational & management characteristics. Above categorisation is a very useful one to take thisinto account.


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Service Magt. System

A comprehensive / holistic approach to building a Service Magt. System is provided

diagrammatically below:-

The Culture

and

Philosophy

MarketSegmentThe ServiceConcept

The ImageThe Delivery

System

1. Market Segment: The particular segment the service Org. wants to provide

Service. This directly affects the type of Service System that is created.

2. Service Concept: Type of benefit to be offered to clients related to particular

segment.

3. The Service Delivery System: By far the most important part of Service Systems

& deals with people, both employees & clients, technology, Physical setting &Support in terms of equipment & well defined processes. This part of System is the

production (Operational) & distribution part of Service Product.

4. Image: The Companys communication tool to influence the staff & clients about

what the Company is & what direction it is taking in terms of future.

5. Culture & Philosophy: The Principles which Company wants to live upto in terms

of values & ethos wants every section of employees to internalise & Practice. Thisis closely linked to service concept & good service delivery discussed earlier.


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Service System Customer Perspective Service System which interacts with Recipient (Customer) consists of two parts viz; (i)

Service Operations System (ii) Service Delivery System. See Diagrammatic

Representation.

PhysicalSupport

Contact

Personnel

Service A

Service B

Customer A

Customer B

Service Delivery System

Visible to Customer(Front Stage)

Technical

Core

Service

Operations

System

Not visible to

Customer.

(Back Stage)

Direct Interaction

Indirect Secondary Interaction

(By Langeard, Bateson & Lovelock)

Service Operations System where Peoples Actions, Physical Setting & Supporting Equipment

create (Produce) the product supported by Technical core consisting of another set of people, processes& equipment hidden (Back stage) from customer.

(Note: It derives from Service Concept, Service delivery & Cultural Aspects of Service Magt Systemdescribed in earlier slides)


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Service System Customer Perspective (contd/-)

Front Stage operations to perform well, need to have perfect alignment with back stage

performance with well defined processes.

Note: Front Stage / Backstage are also referred to as Front End / Back End

Operations.

Performance of people within a good physical setting, are crucial supported by good

processes in creation of good product quality. The recipient (customer) experience the

quality of performance besides good tangible elements, in reckoning his final perception

of good service quality.

Ex : In a restaurant service good ambiance (physical setting), quick, polite & courteous

helping waiters are important elements besides good food cooked at backend with

timely precision.

Consequently HR activities & building sound systems & procedures become very

important elements of Service Magt.

Imp. Recipient customer & other customers also play an important role in creation of the

product.


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Service Delivery System It overlaps partly with service operations particularly with the

visible part of the operations (see diagramme).

Consequence of each action of service personnel becomes part of the product

consumed by the recipient.

Thus delivery of service product is again dependent of good skills, positive attitude &

consequent amiable behaviour, consistent good performance of service personnel

aligned with delivery of good tangible elements leading to satisfaction & happiness of the

customer receiving the service.

An important part of service delivery sometimes is also enacted by other customers

present in place of service delivery which also needs to be managed in positive manner.

Thus service personnel are also expected to monitor behaviour and actions of other

customers to create a positive experience.

In conclusion a good service magt. Calls for effective management of 3P of People,

Process & Physical setting. (More of it will be dealt in Services Marketing Course).


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It is now easy to visualise that a part of Marketing activity like good service delivery &

good selling is done by service personnel & Marketer needs to closely align their

advertising, promise of good product with skills, attitudes & performance of service

personnel both at operations & delivery stages. (Note: More of it will be dealt in Services

Marketing Course).

So HR, Operations & Marketing are closely aligned functions and need to be performed

through multi discipline teams composed of personnel drawn from these functionalareas.

V.Imp.: Above is a major distinction between a manufacturing of physical goods system

& a service system essentially because of four characteristics of services (stated

earlier).

In physical goods manufacturing operations are away from customer & human

intervention is minimal because goods quality is controlled by Electro-mechanical

systems & goods after production are stored & moved to place of delivery to end

customers through channels like wholesellers, distributors or retailers. Customer is

neither present at operations site nor is part of production process.


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Management of People in Services

As discussed earlier people are crucial in successful & good Service Operation and

delivery. Hence what are the issues in Managing People?

People Magt. can be divided in three levels:

I. Magt. of Service Employees

II. Magt. of Customers including other Customers.

III. Magt. of Service Delivery channels i.e. Intermediaries e.g; Distributors,

Franchisees, Agents, Brokers, etc.

Magt. of Service Employees:- Here the focus has to be on following aspects:

a) Recruitment

b) Training

c) Empowerment

d) Support Systems

e) Internal Quality measurement & rewards system.

While the above aspects are as much relevant in any other manufacturing or other kinds

of organisation, their importance in Service system is paramount & nature & content of

each aspect differs substantially because

i. People are Service & Brand

ii. People in Services are Organisation

iii. People in Services are Marketers


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Management of People in Services

Some differences in Managing (a) to (e)

a) Recruitment :-i. Look for Right & Best People. They should be recruited not only for Service

Competence but for Service Inclination.

ii. Service Job calls for stress & emotional labour. Spot people who carry ability to

live with these rigours.

b) Training:-

i. For technical & interactive skills e.g. good communication, patience, ability to spotinherent needs of reipients, consistency.

ii. Motivation

iii. Proper attitude building & amiable behaviour

c) Empowerment:- To enable employees to deal with unusual situations because service

delivery is mostly real time.

d) Support Systems:- Employees ability to create & deliver good quality services ongood / smooth internal processes / systems & integrated communication systems

within the Enterprise & needs to be carefully developed.

e) Internal Quality Measurement & Rewards:- Any system dealing with people can

work well only when an objective system of Performance Quality vis--vis the

customer is in place & consequently right performing employees are rewarded.


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Magt. of Customers / other Customers

In service Operations & Delivery i.e. Final Assembly, Creation & Delivery of

Service Product Customers also play an important role (Refer Service Flower

Discussion), hence organisation has a duty to educate, inform & guide

customers to build best possible service. Dos & Donts, Answers to frequently

asked questions, proper & simple information & instructions are all part of it.

Other Customers also form a part of it.


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Magt. of Channels

Services sometimes are created & delivered through intermediate channels e.g.

International or National Hotel & Restaurant chains having Franchisees, Insurance

Products & Services being delivered by Brokers & Agents etc.

In all these situations Parent Organisation has to invest considerable amount of time,

money & effort to control the conduct of such intermediaries to display attitude &

behaviour in alignment with the Parent Orgs Culture, Vision & Mission.

All the aspects like training, motivation, empowerment become important as discussed

earlier.

In short, to manage successful service operation / delivery manage the channel first.


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7 P Concept of Services ManagementIn Service Magt. People, Process & Physical Evidence of service are of crucial importance

while Marketing of services is operationalised. In earlier Service Magt. System a brief

reference was made. More details follow hereinafter:-

The traditional marketing mix consists of 4 P e.g.

(1) Product (2) Place (Distribution) (3) Promotion (4) Price

In services besides these 4 Ps the following are crucial elements, a marketer has to

contend with as key strategy decision areas viz.,

(1) People (2) Physical Evidence (3) Process (4) Productivity & Service Quality*See Note below

While handling these strategy areas the marketers concerns are:

People Physical Evidence Process1. Employees recruitment,

training, motivation rewards

& team work

Facility design aesthetics

functionality ambient

conditions

Flow of activities e.g.

Standardised customised

2. Customers Education

Training

Equipment

Signage

Number of steps simple

complex

3. Communicating culture &

values

Employee dress Level of customer

involvement

4. Employee Research Other Tangible reports

Business Cards

Statement / Guarantees

* Item (4) is mentioned but generally considered separately because of its great importanceis Service Mktg & will be dealt briefly in this course.

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