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.

Proportion of Goods and Services in Purchase Bundle

Goods Services

100%

75

50

25

25

50

75

100%

Self-service gasoline. Personal computer Office copier. Fast-food restaurant Gourmet restaurant Auto repair Airline flight. Haircut.

The Service Process Matrix

Degree Degree of Interaction and Customization of labor Intensity Low High
Service factory: * Airlines * Trucking * Hotels * Resorts and recreation Mass service: * Retailing * Wholesaling * Schools * Retail aspects of commercial banking Service shop: * Hospitals * Auto repair * Other repair services

Low

High

Professional service: * Doctors * Lawyers * Accountants * Architects

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 purchased or consumed by the buyer or items provided by the consumer. Examples are food items, auto parts, legal documents, golf clubs.

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.

Unique Characteristics of Services

Intangibility: creative advertising, no patient 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 coproduction

Service Process Orientation

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

Strategic Service Classification (Nature of the Service Act)

Direct Recipient of the Service Nature of the Service Act
People Peoples bodies:
Health care Passenger transportation

Things Physical possessions:

Freight transportation Equipment repair and maintenance Veterinary care Janitorial services Laundry and dry cleaning Landscaping/lawn care

Tangible actions

Beauty salons Exercise clinics Restaurants Haircutting

Peoples minds:
Education

Intangible assets:
Banking Legal services Accounting Securities Insurance

Intangible actions

Broadcasting Information services Theaters Museums

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 Telephone subscription Radio station Police protection Lighthouse Public Highway

Continuous delivery of service

College enrollment Banking American Automobile association Long-distance phone calls Theater series subscription

Restaurant Mail service Toll highway Movie theater Public transportation

Discrete transactions

Commuter ticket or transit pass Sams Wholesale Club Egghead computer software

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
Professional services Surgery Taxi services Education (large classes) Preventive health programs College food service

High

Beautician Plumber Gourmet restaurant Telephone service Hotel services Public transportation Routine appliance repair Movie theater Spectator sports Fast-food restaurant

Low

Retail banking (excl. major loans) Family restaurant

Strategic Service Classification (Nature of Demand and Supply)

Extent of Demand Fluctuation over Time Extent to which Supply Is Constrained
Peak demand can usually be met without a major delay Wide
Electricity Natural gas Telephone Hospital maternity unit Police and fire emergencies Accounting and tax preparation Insurance Legal services Banking Laundry and dry cleaning

Narrow

Services similar to those above but with insufficient capacity for their base level of business

Peak demand regularly exceeds capacity

Passenger transportation Hotels and motels Restaurants

Strategic Service Classification (Method of Service Delivery)

Availability of Service Outlets Nature of Interaction between Customer and Service Organization
Customer goes to service organization Service organization comes to customer Single site
Theater Barbershop Lawn care service Pest control service Taxi Credit card company Local TV station

Multiple site
Bus service Fast-food chain Mail delivery AAA emergency repairs

Customer and service organization transact at arms length (mail or electronic communications)

Broadcast network Telephone company

Open Systems View of Service Operations

Service Process Consumer arrivals (input) Consumer participant Consumer-Provider interface Control Customer demand Service operations manager Production function: Alter Monitor and control process Schedule demand Marketing function: supply Interact with consumers Control demand Modify as necessary Define standard Service package Supporting facility Facilitating goods Explicit services Implicit services Consumer departures ( output) Evaluation Criteria Measurement

Monitor Service personnel

Perceived needs Location

Empowerment Training Attitudes

Communicate by advertising

Basis of selection

Village Volvos Service Package

Supporting Facility Facilitating Goods Explicit Services Implicit Services

Village Volvos Distinctive Characteristics

Intangibility Perishability Heterogeneity Simultaneity Customer Participation in the Service Process

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?

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 firms image?