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 opensystems 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 patient

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 coproduction

A Basic View: Services as a Service/Product Bundle

Element Business Core Good/Service Peripheral Goods Peripheral Service Variant Core Goods Example Custom clothier Business suits Garment bag Deferred payment plans Coffee lounge Core Service Example Business hotel Room for the night Bath robe In house restaurant 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
* * * * Service Factory: Airlines Trucking Hotels Resorts and recreation

High
Service Shop: * Hospitals * Auto repair * Other repair services

Low

Degree of labor Intensity

High

Mass Service: * Retailing * Wholesaling * Schools * Retail aspects of commercial banking

Professional Service: * Doctors * Lawyers * Accountants * Architects

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 Who can I learn from? How can I differentiate myself?

Why do this?

Strategic Service Classification (Nature of the Service Act)

Direct Recipient of the Service
People
Services Directed at Peoples Bodies: Healthcare Passenger transportation Beauty salons Exercise clinics Restaurants Services Directed at Peoples Minds: Education Broadcasting Information Services Theaters Museums

Things
Services Directed at Goods and other Physical Possessions: Freight transportation Repair and maintenance Laundry and dry cleaning Veterinary care

Tangible Actions

Nature of the Service Act

Intangible Actions

Services Directed at Intangible Assets: Banking Legal services Accounting Securities Insurance

Strategic Service Classification (Relationship with Customers)

Type of Relationship between Service Organization and its Customers
Membership Relationship
Insurance Telephone subscription Electric Utility Banking Long-distance phone calls Theater series tickets Transit pass Wholesale buying club Airline frequent flyer

No Formal Relationship
Radio station Police protection Lighthouse Public highway Toll highway Pay phone Movie theater Public transportation Restaurant

Nature of the Service Delivery

Continuous Delivery of Service Discrete Transactions

Strategic Service Classification (Customization and Judgment)

Extent to which Service Characteristics are Customized
High Low
Education (large classes) Preventive health programs Family restaurants

Extent to which Customer Contact Personnel Exercise Judgment in Meeting Individual Customer Needs

High

Surgery Taxi service Gourmet restaurant

Low

Telephone service Hotel services Retail banking Cafeteria

Public transportation Movie theater Spectator sports Institutional food service

Strategic Service Classification (Nature of Demand and Supply)

Extent of Demand Fluctuations over Time
Wide Peak demand can usually be met without delay Peak demand regularly exceeds capacity
Electricity Telephone Hospital maternity unit Police emergencies Tax preparation Passenger transportation Hotels and motels

Narrow
Insurance Legal services Banking Laundry and dry cleaning Fast food restaurant Movie theater Gas station

Extent to which Supply is Constrained

Strategic Service Classification (Method of Service Delivery)

Availability of Service Outlets
Single Site Customer Travels to Service Firm
Theater Barbershop

Multiple Site
Bus service Fast food chain

Nature of Interaction Between Customer and Service Organization

Service Provider Travels to Customer Transaction is at Arms Length

Pest control service Taxi

Mail delivery AAA emergency repairs National TV network Telephone company

Credit card company Local TV station

Service Operations: An Open Systems View

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

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 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 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?

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.