Role of Services in an Economy and

nature of services

Chapter 1 & 2

S1 - 28-6-2022
 Service Definitions

A service is a time-perishable, intangible experience performed for

a customer acting in the role of a co-producer.

James Fitzsimmons

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 Percent Employment in Services

Nation % of World % Ag % Goods % Services

Labor
China 21.0 50 15 35
India 17.0 60 17 23
USA 4.8 2 20 78
Indonesia 3.9 45 16 39
Brazil 3.0 23 24 53
Russia 2.5 12 23 65
Japan 2.4 5 26 69
Nigeria 2.2 70 10 20
Bangladesh 2.2 63 11 26

Germany 1.4 3 28 69
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 Role of Services in an Economy

FINANCIAL SERVICES
INFRASTRUCTURE SERVICE
· Financing · Communications
· Leasing · Transportation
· Insurance · Utilities
· Banking

PERSONAL SERVICES
MANUFACTURING · Healthcare
Services inside company: · Restaurants
DISTRIBUTION
· Finance · Hotels
SERVICES
· Accounting
· Wholesaling
· Legal
· Retailing
· R&D and design CONSUMER
· Repairing
(Self-service)

BUSINESS SERVICES
· Consulting GOVERNMENT SERVICES
· Auditing · Military
· Advertising · Education
· Waste disposal · Judicial
· Police and fire protection
Service provided and received
 Typology of Services in the 21st Century

Core Experience Essential Feature Examples

Creative Present ideas Advertising, theater

Enabling Act as intermediary Transportation, communications

Experiential Presence of customer Massage, theme park

Extending Extend and maintain Warranty, health check

Entrusted Contractual agreement Service/repair, portfolio mgt.

Information Access to information Internet search engine

Innovation Facilitate new concepts R&D services, product testing

Problem solving Access to specialists Consultants, counseling

Quality of life Improve well-being Healthcare, recreation, tourism

Regulation Establish rules and regulations Environment, legal, patents

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 Foundation Premises of Service-Dominant Logic

1. Service is the fundamental basis of exchange.

2. Indirect exchange masks the basis of exchange.
3. Goods are distribution mechanisms for service provision.
4. Operant resources are the source of competitive advantage
5. All economies are service economies.
6. The customer is always a co-creator of value.
7. The enterprise can only offer value propositions.
8. A service-centered view is customer oriented and relational.
9. All economic and social actors are resource integrators.
10. Value is uniquely determined by the beneficiary.

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 Distinctive Characteristics of Services

 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 (empty airline, un occupied hospital)
 Intangibility: creative advertising, no patent protection, importance of reputation
 Heterogeneity: customer involvement in delivery process results in variability
 Customer Participation in the Service Process: attention to facility design,
opportunities for co-production, concern for customer and employee behavior

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 Non-ownership Classification of Services

Type of Service Customer value Examples Management Challenge

Goods rental Obtain temporary right to Vehicles, tools, furniture, Site selection and maintenance
exclusive use equipment

Place and space rental Obtain exclusive use of defined Hotel room, seat on airplane, Housekeeping and achieving
portion of a larger space storage unit economies of scale

Labor and expertise Hire other people to do a job Car repair, surgery, management Expertise is a renewable resource,
consulting but time is perishable

Physical facility usage Gain admission to a facility for a Theme park, camp ground, Queuing and crowd control
period of time physical fitness gym

Network usage Gain access to participate Electric utility, cell phone, internet Availability and pricing decisions

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Service Package

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 Service Package Elements

Supporting Facility

Facilitating Goods

Information

Explicit Services

Implicit Services

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 The Service Package Elements

• 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.
• 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.
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 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 banking * Architects

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