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. Unified Services Theory “With service processes, the customer provides significant inputs to the production process. With manufacturing processes, groups of customers may contribute ideas to the design of the product, but individual customers’ only participation is to select and consume the output. All managerial themes unique to services are founded in this distinction” Sampson, IJSIM 11:4 (2001). Unified Service Theory Themes Service processes are distinguished from non-service processes only by the presence of customer inputs and implications thereof. For those familiar with business management in general, understanding those additional issues unique to managing services requires only understanding the implications of customer inputs. Customer inputs are the root cause of the unique issues and challenges of services management. Sampson and Froehle, POMJ 15:2 (2006) Unique Characteristics of Services Intangibility: creative advertising, no patent 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 co- production A Basic View: Services as a Service/Product Bundle Element Core Goods Core Service Example Example Business Custom clothier Business hotel Core Good/Service Business suits Room for the night Peripheral Garment bag Bath robe Goods Peripheral Deferred payment In house restaurant Service plans Variant Coffee lounge Airport shuttle A More Elaborate View: 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. Understanding Service Processes: The Service Process Matrix Degree of Interaction and Customization Low High Service Factory: Service Shop: * Airlines * Hospitals Low * Trucking * Auto repair * Hotels * Other repair services Degree of * Resorts and recreation labor Mass Service: Professional Service: Intensity * Retailing * Doctors High * Wholesaling * Lawyers * Schools * Accountants * Retail aspects of * Architects commercial banking Service Process Efficiency and Effectiveness 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 Classifying Services Through Structural Positioning Classifications: The Nature of the Service Act Relationship with Customers Customization and Judgment Nature of Demand and Supply Method of Service Delivery Why do this? Who can I learn from? How can I differentiate myself? Strategic Service Classification (Nature of the Service Act) Direct Recipient of the Service People Things Services Directed at Services Directed at Goods and People’s Bodies: other Physical Possessions: Healthcare Freight transportation Tangible Passenger transportation Repair and maintenance Actions Beauty salons Laundry and dry cleaning Exercise clinics Veterinary care Nature of Restaurants the Services Directed at Services Directed at Intangible Service People’s Minds: Assets: Act Education Banking Intangible Broadcasting Legal services Actions Information Services Accounting Theaters Securities Museums Insurance Strategic Service Classification (Relationship with Customers) Type of Relationship between Service Organization and its Customers “Membership” Relationship No Formal Relationship Insurance Radio station Telephone subscription Police protection Nature Continuous Delivery of Electric Utility Lighthouse of the Banking Public highway Service Service Long-distance phone calls Toll highway Delivery Theater series tickets Pay phone Discrete Transactions Transit pass Movie theater Wholesale buying club Public transportation Airline frequent flyer Restaurant Strategic Service Classification (Customization and Judgment) Extent to which Service Characteristics are Customized High Low Extent to which Surgery Education (large classes) Customer High Taxi service Preventive health programs Contact Gourmet restaurant Family restaurants Personnel Exercise Judgment in Telephone service Public transportation Meeting Low Hotel services Movie theater Individual Retail banking Spectator sports Customer Needs Cafeteria Institutional food service Strategic Service Classification (Nature of Demand and Supply) Extent of Demand Fluctuations over Time Wide Narrow Peak demand Electricity Insurance can usually be Telephone Legal services Extent to met without Hospital maternity unit Banking which delay Police emergencies Laundry and dry cleaning Supply is Constrained Peak demand Tax preparation Fast food restaurant regularly Passenger transportation Movie theater exceeds Hotels and motels Gas station capacity Strategic Service Classification (Method of Service Delivery) Availability of Service Outlets Single Site Multiple Site Customer Travels Theater Bus service to Service Firm Barbershop Fast food chain Nature of Interaction Between Service Provider Pest control service Mail delivery Travels to Taxi AAA emergency Customer and Customer repairs Service Organization Transaction is at Credit card company National TV network Arm’s Length Local TV station Telephone company Service Operations: An Open Systems View 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 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 Classifiction Nature of the service act Relationship with customers Customization and judgement Nature of demand and supply Method of service delivery Xpresso Lube Questions 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? Interactive Class Exercise The class will break into five groups and each group will be 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.