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.
An Integrated Approach to Service Management

The Eight Components

• Product Elements
• Place, Cyberspace, and Time
• Promotion and Education
• Price and Other User Outlays
+ Process
+ Productivity and Quality
+ People
+ Physical Evidence
Require the Integration of Marketing,
Operations, and Human Resources
 Service/Product Bundle
Element Core Goods Core Service
Example Example
Business Custom clothier Business hotel

Core Business suits Room for the

night
Peripheral Garment bag Bath robe
Goods
Peripheral Deferred In house
Service payment plans restaurant
Variant Coffee lounge Airport shuttle
The Service Process Matrix
Degree Degree of Interaction and Customization
of labor Intensity 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
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.
Distinctive Characteristics of Services
 Customer Participation in the Service Process:
attention to facility design but opportunities for co-
production
 Simultaneity: opportunities for personal selling,
interaction creates customer perceptions of quality
 Perishability: cannot inventory, opportunity loss of
idle capacity, need to match supply with demand
 Intangibility: creative advertising, no patent
protection, importance of reputation
 Heterogeneity: customer participation in delivery
process results in variability
Strategic Service Classification
(Nature of the Service Act)
Direct Recipient of the Service
Nature of
the Service Act People Things
People’s bodies: Physical possessions:

Health care Freight transportation

Passenger transportation Repair and maintenance
Tangible actions Beauty salons Veterinary care
Exercise clinics Janitorial services
Restaurants Laundry and dry cleaning

People’s minds: Intangible assets:

Education Banking
Intangible actions Broadcasting Legal services
Information services Accounting
Theaters Securities
Museums Insurance
Strategic Service Classification
(Relationship with Customers)
Type of Relationship between Service Organization and Its Customers
Nature of
Service Delivery “Membership” relationship No formal relationship

Insurance Radio station

Telephone subscription Police protection
Continuous delivery Electric Utility Lighthouse
of service Banking Public Highway

Long-distance phone calls Restaurant

Theater series tickets Pay phone
Discrete transactions Transit pass Toll highway
Sam’s Wholesale Club Movie theater
Airline frequent flyer Public transportation
Strategic Service Classification
(Customization and Judgment)
Extent to Which Service Characteristics Are Customized
Extent to Which Personnel
Exercise Judgment in Meeting
Customer Needs High Low

Surgery Preventive health programs

High Taxi services Education (large classes)
Gourmet restaurant Family restaurant

Telephone service Public transportation

Hotel services Spectator sports
Low Retail banking Movie theater
Cafeteria Institutional food service
Strategic Service Classification
(Nature of Demand and Supply)
Extent of Demand Fluctuation over Time
Extent to which Supply
Is Constrained Wide Narrow

Electricity Insurance
Peak demand can Telephone Legal services
usually be met Police emergency Banking
without a major delay Hospital maternity unit Laundry and dry cleaning

Tax preparation Fast food restaurant

Peak demand regularly Passenger transportation Movie theater
exceeds capacity Hotels and motels Gas station
Strategic Service Classification
(Method of Service Delivery)
Availability of Service Outlets
Nature of Interaction
between Customer and
Service Organization Single site Multiple site

Customer travels to Theater Bus service

service organization Barbershop Fast-food chain

Service provider Taxi Mail delivery

travels to customer Pest control service AAA emergency repairs
Taxi

Transaction is at Credit card company Broadcast network

arm’s length Local TV station Telephone company
Open Systems View of Services
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
Village Volvo’s Service Package
 Supporting Facility

 Facilitating Goods

 Information

 Explicit Services

 Implicit Services
Village Volvo’s Distinctive
Service Characteristics
 Intangibility

 Perishability

 Heterogeneity

 Simultaneity

 Customer Participation in the Service Process

Village Volvo’s Service
Classification
 Nature of the service act

 Relationship with customers

 Customization and judgement

 Nature of demand and supply

 Method of service delivery

Managing Village Volvo
 How could Village Volvo manage its
back office (repair operations) like a
factory?

 How can Village Volvo differentiate itself

from Volvo dealers?
Xpresso Lube Facility
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
Classification
 Nature of the service act

 Relationship with customers

 Customization and judgement

 Nature of demand and supply

 Method of service delivery

 Beyond Xpresso Lube

 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?
 What contributions to the management of professional
service firms can a business school graduate provide?
Interactive Class Exercise
The class breaks into five groups and each
group is 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.