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.

An Integrated Approach to Service Management

The Eight Components Product Elements Place, Cyberspace, and Time Promotion and Education Price and Other User Outlays + Process + Productivity and Quality + People + Physical Evidence Require the Integration of Marketing, Operations, and Human Resources

Service/Product Bundle
Element
Business Core

Core Goods Example Custom clothier

Business suits

Core Service Example Business hotel

Room for the night

Peripheral Goods Peripheral Service Variant

Garment bag
Deferred payment plans Coffee lounge

Bath robe
In house restaurant Airport shuttle

The Service Process Matrix

Degree Degree of Interaction and Customization of labor Intensity Low High
Service factory: * Airlines * Trucking * Hotels * Resorts and recreation Mass service: * Retailing * Wholesaling * Schools * Retail aspects of commercial banking Service shop: * Hospitals * Auto repair * Other repair services

Low

High

Professional service: * Doctors * Lawyers * Accountants * Architects

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.

Distinctive Characteristics of Services

Customer Participation in the Service Process: attention to facility design but opportunities for coproduction 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 Intangibility: creative advertising, no patent protection, importance of reputation Heterogeneity: customer participation in delivery process results in variability

Strategic Service Classification (Nature of the Service Act)

Direct Recipient of the Service Nature of the Service Act
People Peoples bodies:
Health care Passenger transportation

Things Physical possessions:

Freight transportation Repair and maintenance Veterinary care Janitorial services Laundry and dry cleaning

Tangible actions

Beauty salons Exercise clinics Restaurants

Peoples minds:
Education

Intangible assets:
Banking Legal services Accounting Securities Insurance

Intangible actions

Broadcasting Information services Theaters Museums

Strategic Service Classification (Relationship with Customers)

Type of Relationship between Service Organization and Its Customers Nature of Service Delivery Membership relationship No formal relationship
Insurance Telephone subscription Electric Utility Radio station Police protection Lighthouse

Continuous delivery of service

Banking

Public Highway

Discrete transactions

Long-distance phone calls Theater series tickets Transit pass Sams Wholesale Club Airline frequent flyer

Restaurant Pay phone Toll highway Movie theater Public transportation

Strategic Service Classification (Customization and Judgment)

Extent to Which Service Characteristics Are Customized Extent to Which Personnel Exercise Judgment in Meeting Customer Needs High Low

Surgery
High Taxi services Gourmet restaurant

Preventive health programs

Education (large classes) Family restaurant

Telephone service Hotel services

Public transportation Spectator sports Movie theater Institutional food service

Low

Retail banking Cafeteria

Strategic Service Classification (Nature of Demand and Supply)

Extent of Demand Fluctuation over Time Extent to which Supply Is Constrained
Wide
Electricity Insurance Legal services Banking Laundry and dry cleaning

Narrow

Peak demand can usually be met without a major delay

Telephone Police emergency Hospital maternity unit

Tax preparation

Fast food restaurant Movie theater Gas station

Peak demand regularly exceeds capacity

Passenger transportation Hotels and motels

Strategic Service Classification (Method of Service Delivery)

Availability of Service Outlets Nature of Interaction between Customer and Service Organization
Customer travels to service organization Service provider travels to customer Single site
Theater

Multiple site
Bus service

Barbershop
Taxi Pest control service Taxi

Fast-food chain
Mail delivery AAA emergency repairs

Transaction is at arms length

Credit card company

Local TV station

Broadcast network
Telephone company

Open Systems View of Services

Service Process Consumer Evaluation

Consumer arrivals (input)

Consumer participant Consumer-Provider interface

Control

departures ( output)

Criteria Measurement

Monitor Service personnel Empowerment Training Attitudes

Customer demand Perceived needs Location

Service operations manager Production function: Alter Monitor and control process Schedule demand Marketing function: supply Interact with consumers Control demand Modify as necessary Define standard Service package Supporting facility Facilitating goods Explicit services Implicit services

Communicate by advertising

Basis of selection

Village Volvos Service Package

Supporting Facility
Facilitating Goods

Information
Explicit Services Implicit Services

Village Volvos Distinctive Service Characteristics

Intangibility
Perishability Heterogeneity Simultaneity Customer Participation in the Service Process

Village Volvos Service Classification

Nature of the service act

Relationship with customers

Customization and judgement

Nature of demand and supply Method of service delivery

Managing Village Volvo

How could Village Volvo manage its back office (repair operations) like a factory?
How can Village Volvo differentiate itself from Volvo dealers?

Xpresso Lube Facility

Xpresso Lubes Service Package

Supporting Facility
Facilitating Goods

Information
Explicit Services Implicit Services

Xpresso Lubes Distinctive Service Characteristics

Intangibility
Perishability Heterogeneity Simultaneity Customer Participation in the Service Process

Xpresso Lubes Service Classification

Nature of the service act

Relationship with customers

Customization and judgement

Nature of demand and supply Method of service delivery

Beyond Xpresso Lube

What elements of Xpresso Lubes 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 firms image? What contributions to the management of professional service firms can a business school graduate provide?

Interactive Class Exercise

The class breaks into five groups and each group is 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.