Understanding Services

What do u mean by Services?

 An act or performance offered by one party to
another (performances are intangible, but may
involve use of physical products)

 An economic activity that does not result in

ownership

 A process that creates benefits by facilitating a

desired change in customers themselves,
physical possessions, or intangible assets
The Service Sector
 Includes businesses, government agencies,
nonprofits
 Jobs range from high-paid professionals and
technicians to minimum-wage positions
 Service organizations can be any size--from
huge global corporations to local small
businesses
 In most countries, adds more economic value
than agriculture, raw materials and
manufacturing combined
 In the USA -- world’s largest economy --
services account for 73% of GDP and 76% of
jobs
Fig. 1.1: GDP by Industry in the USA,
1999
A g r ic u ltu r e , F o r e s tr y,
F is h in g a n d M in in g F in a n c e , In s u r a n c e
7% a n d R e a l Es ta te
20%
M a n u fa c tu r in g
16%

W h o le s a le a n d
G o v e rn m e n t R e ta il Tr a d e
(M o s tly S e rv ic e s ) 17%
12%

O th e r S e r v ic e s S E R V I C E S
10% Tr a n s p o r t, U tilitie s
B u s in e s s a n d C o m m u n ic a tio n s
H e a lth 8%
S e rv ic e s
5%
5%
Changing Structure of Employment
as Economic Development Evolves
Share of
Employment
Agriculture

Services

Industry

Time, per Capita Income

Some Industries in the Service Sector
 Banking, stockbroking
 Lodging
 Restaurants, bars,
catering
 Insurance
 News and entertainment
 Transportation (freight
and passenger)
 Health care
 Education
 Wholesaling and retailing
 Laundries, drycleaning
 Repair and maintenance
 Professional (e.g., law,
architecture, consulting)
Internal Services
 Service elements within an organization that
facilitate creation of--or add value to--its final
output
 Includes:
 accounting and payroll administration
 recruitment and training
 legal services
 transportation
 catering and food services
 cleaning and landscaping

 Increasingly, these services are being

outsourced
Basic Differences between
Goods and Services
 Customers do not obtain ownership of services
 Service products are intangible performances--not
objects
 Customers often actively involved in production process
 Other people may form part of product experience
 More variability in operational inputs and outputs--harder
to improve productivity, control quality
 Often difficult for customers to evaluate
 Absence of inventories after production
 Time factor is more important--speed may be key
 Delivery systems include electronic and physical
channels
 Value Added by Tangible versus
Intangible Elements in Goods and
Services
Hi
Salt
Soft drinks
VCR
Tennis racquet
New car
Tangible Elements

Custom-made clothes
Furniture rental
Fast food restaurant
Plumbing repair
Lawn care
Oil change on car
House cleaning
Airline flight
Teaching
Lo Intangible Elements Investment mgt.
Hi
The “8Ps” of Integrated Service
Management vs. the Traditional “4Ps”
 Product elements
 Place, cyberspace, and
time
 Process
 Productivity and quality
 People
 Promotion and
education
 Physical evidence
 Price and other user
outlays
8Ps:
(1) Product Elements
All Aspects of Service Performance that Create
Value
 Core product features
 Bundle of supplementary service elements
 Performance levels relative to competition
 Benefits delivered to customers
 Guarantees
8Ps:
(2) Place, Cyberspace, and Time
Delivery Decisions: Where, When, and How
 Geographic locations served
 Service schedules
 Physical channels
 Electronic channels
 Customer control and convenience
 Channel partners/intermediaries
8Ps:
(3) Process
Method and Sequence in Service Creation and
Delivery
 Design of activity flows
 Number and sequence of actions for customers

 Providers of value chain components

 Nature of customer involvement
 Role of contact personnel
 Role of technology, degree of automation
8Ps:
(4) Productivity and Quality
Synergy in Value Creation for Customers and the
Firm
 Achieve productive transformation of inputs to
outputs
 efficiency (cost control, avoidance of waste)
 effectiveness (value added, including quality and
timeliness)
 Attain customer-defined quality standards
 reliability
 responsiveness
 competence/trust
 human dimensions
 tangibles
8Ps:
(5) People
The Human Side of the Enterprise
 The right employees performing tasks well
 job design
 recruiting/selection
 training
 motivation
 evaluation/rewards
 empowerment/teamwork
 The right customers for the firm’s mission
 fit well with product/processes/corporate goals
 appreciate benefits and value offered
 possess (or can be educated to have) necessary skills
 firm is able to manage customer behavior
8Ps:
(6) Promotion and Education
Informing, Educating, Persuading, and Reminding
Customers
 Marketing communication tools
 media elements (print, broadcast, outdoor, retail, Internet, etc.)
 personal selling, customer service
 sales promotion
 publicity/PR
 Imagery and recognition
 branding
 corporate design
 Content
 information, advice
 persuasive messages
 customer education/training
8Ps:
(7) Physical Evidence
Providing tangible evidence of service
performances
 Create and maintaining physical appearances
 buildings/landscaping
 interior design/furnishings
 vehicles/equipment
 staff grooming/clothing
 other tangibles
 Select tangible metaphors for use in marketing
communications
8Ps:
(8) Price and Other User Costs
Managing Customer Outlays Relative to
Corporate Revenues
 Quoted price level and trade margins
 Discount terms
 Price-setting mechanism
 determined by seller
 negotiation/barter
 auction/reverse auction
 Credit terms
 Strategies to minimize other user costs
 out-of-pocket financial expenses (e.g., travel, phone)
 time investments and mental/physical effort
 negative sensory experiences
Factors Stimulating Competition and
Innovation in the Service Economy
 Government Policies (e.g., regulations, trade
agreements)
 Social Changes (e.g., affluent, time poor, seek
experiences)
 Business Trends
 Manufacturers offer service
 Growth of chains and franchising
 Pressures to improve productivity and quality
 More strategic alliances
 Marketing emphasis by nonprofits
 Innovative hiring practices
 Advances in IT (e.g., speed, digitization, wireless,
Internet)
 Internationalization (travel, transnational companies)
Some Impacts of Technological Change
 Radically alter ways in which service firms do
business:
 with customers (new services, more convenience)
 behind the scenes (reengineering, new value chains)
 Create relational databases about customer
needs and behavior, mine databanks for insights
 Leverage employee capabilities and enhance
mobility
 Centralize customer service, be faster and more
responsive
 Develop national/global delivery systems
 Create new, Internet-based business models
The Service Management Decision
Framework
W h a t B u s in e s s A r e W e In ?

W h a t S e r v ic e P r o c e s s e s C a n B e U s e d in W h o A r e O u r C u s to m e r s a n d H o w S h o u ld
O u r O p e ra tio n ? W e R e la te to Th e m ?

W h a t S h o u ld b e th e C o r e a n d S u p p le m e n ta r y
E le m e n ts o f O u r S e rv ic e P ro d u c t?

W h a t P ric e S h o u ld W e C h a rg e H o w S h o u ld W e C o m m u n ic a te W h a t
fo r O u r S e rv ic e s ? O u r S e r v ic e H a s to O ffe r?

W h a t A r e th e O p tio n s fo r D e liv e rin g H o w C a n W e B a la n c e P ro d u c tiv ity

O u r S e r v ic e ? a n d Q u a lity ?

H o w S h o u ld W e M a tc h D e m a n d a n d P r o d u c tiv e C a p a c ity ?

W h a t A r e A p p r o p r ia t e R o le s fo r P e o p le a n d Te c h n o lo g y ?

H o w C a n O u r F ir m A c h ie v e S e r v ic e Le a d e r s h ip ?
Relating the 8Ps to the
Service Decision Framework
W H A T B U S IN E S S A R E W E I N ?

W h a t S e r v ic e P r o c e s s e s C a n B e U s e d in W h o A re O u r C u s to m e rs a n d
O u r O p e r a t io n ? ( P R O C E S S ) H o w S h o u ld W e R e la t e to T h e m ?

W h a t S h o u ld b e t h e C o r e a n d S u p p le m e n ta r y E le m e n t s
o f O u r S e r v ic e P r o d u c t? ( P R O D U C T E LE M E N T S )

W h a t P r ic e S h o u ld W e C h a r g e ? H o w t o C o m m u n ic a te ? ( P R O M O T IO N &
(P R IC E A N D O T H E R U S E R O U TLA Y S ) E D U C A T IO N , P H Y S IC A L E V ID E N C E )

O p tio n s fo r D e liv e r y ? ( P L A C E , C Y B E R S P A C E H o w C a n W e B a la n c e
& T IM E , P H Y S IC A L E V ID E N C E ) P R O D U C T IV IT Y A N D Q U A L IT Y ?

H o w S h o u ld W e M a t c h D e m a n d a n d P r o d u c t iv e C a p a c ity ?

W h a t A r e A p p r o p r ia te R o le s fo r P e o p le a n d Te c h n o lo g y ? ( P E O P L E )

H o w C a n O u r F ir m A c h ie v e S e r v ic e L e a d e r s h ip ?
Service Decision Framework
What Business Are We In?
 With what industry is our service
associated?
 With what other goods and services do we
compete?
 What forces for change do we face?
 What solutions do we offer to meet
customer needs? (How do we create
value?)