Service Process Design

Chapter 5

McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc. 2007, All Rights Reserved

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 Chapter 5: Outline
Defining Service
Service Guarantees/service recovery
The Service-Product Bundle
Cycle of Service
Customer Contact
Service Matrix
Service/Profit Chain

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The Shift
to
Services
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 Services in Europe

“The Service Sector accounts for

about 70 percent of the European
economy.”
Source: Wall Street Journal, 4 March 2005, p. A13

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 Definition of Service
Key Concepts

No finished goods inventory

Intangibility of the product
Simultaneous production and consumption
Difficulty in defining and measuring quality
and productivity
Other Differences between Manufacturing and
Service (See Table 5.1)

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Production of Services vs. Goods
Typical Differences

Services are process focused.

Customers served as first come, first served.
Labor is scheduled, not the customer.
Location often near customers.
Result: service production tends to be less
efficient than production of goods.
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 Related Concepts

Service guarantee
– Analogous to a guarantee for a product
– Requires specific criteria and responses
Service Recovery
– What you do to compensate the customer for bad
service.

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The Service/Product Continuum
Pure Service
– No product with intrinsic value involved. e.g. lawyer

Service/Product bundle
– Combination of product with service (most common)
Pure Product
– Very rare. Yard sale. Blacksmith.

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Service-Product Bundles
The Service-Product Bundles has three parts:

physical goods (facilitating goods)—what

you can carry away

tangible service (explicit service)—what the

seller does for you.

psychological service (implicit service)—

how you feel about it.
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 Comparison of Goods and Services (Figure 5.1)

Goods Services

100% 75% 50% 25% 0% 25% 50% 75% 100%

Self-service groceries
Automobile
Installed carpeting
Fast-food restaurant
Gourmet restaurant
Auto maintenance
Haircut
Consulting services

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 Moments of Truth
Moment of Truth = customer contact with a
service system.
Service is defined as the cumulative effect
of all the moments of truth.
One failed moment of truth can cause
failure of the entire service.
Therefore, service systems must be
designed as a whole, not in parts.
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 Moments of Truth

Examples from book:

SAS airlines has 50,000 moments of
truth per day.
Marriott hotels has 6,000,000 moments
of truth per day.

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Cycle of Service for an Airline (Figure 5.2)
Customer requests
schedule information
Leaves Makes
Airport reservation

Receive
Baggage Arrives at
airport

Departs
Plane Checks
baggage and
Receives checks in for
in-flight flight
service

Proceeds to gate
Boards and security check
aircraft
Receives
boarding pass
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 Customer Contact (1)

Definition of “contact”—interaction
between service provider and the customer.
Each “moment of truth” is a contact.

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 Customer Contact (2)
Potential inefficiency in services is a function of
the amount of customer contact
Why?
– Customer determines the time
– Customer determines the order of service
– Customer influences what happens during the
service

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 Customer Contact (3)
High contact (front room) services
– Direct customer contact
– Customer has control of process
Low-contact (back room) services
– Out of sight of customer
– Provider has control of process
Goal: move as much activity as possible to
the back room—why?

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 Service Matrix (Figure 5.3)
Degree of Interaction and Customization

Low High
Service factory Service shop
Degree of Labor intensity

Airlines Hospitals
Low Trucking Auto repair
Hotels Repair services
Resort and
recreation
Mass services Professional Services
Retailing Lawyers
High Wholesaling Doctors
Schools Accountants
Retail aspects of Architects
commercial banking
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 Links in the service-profit chain
(See Figure 5.4)

Internal service quality, leads to…

Employee satisfaction, leads to…
Employee retention & productivity, lead to…
External service value, leads to…
Customer satisfaction, leads to…
Customer loyalty, leads to…
Revenue growth & profitability (the goal)

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 Summary
Defining Service
Service Guarantees/service recovery
The Service-Product Bundle
Cycle of Service
Customer Contact
Service Matrix
Service/Profit Chain

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End of Chapter Five

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