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The Nature of Services - PowerPoint

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					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.

				
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