BUSS 2058

Managing Services
March 2022

Topic 1: The Nature of

Services

Required Reading:
Gemmel, P, Van Looy, B & Van
Dierdonck, R 2013, Service
Management: An Integrated
Approach, 3rd edn, Pearson,
Harlow, England. Chapter 1

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 Topic 1: Learning Objectives
 Discuss the role of services in an
economy and organisation.
 Explain the importance of services in
the world economy.
 Describe the characteristics that
distinguish services from goods.
 Identify the driving forces behind the
growth of services.
 Discuss how these characteristics of
services can be used to arrive at
service classifications.

Service Definitions
Services are deeds, processes, and performances

“A service is a time-perishable, intangible experience performed for a

customer acting in the role of a co-producer.”
- Fitzsimmons & Fitzsimmons 2011, p.4

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 Learning Objective

 Discuss the role of services in an

economy and organisation.

Service & Economy

“No economy can function without the infrastructure

that services provide in the form of transportation and
communications and without government services
such as education and health care.”
(Fitzsimmons, Fitzsimmons & Bordoloi 2014, p.1)

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 Stages of Economic Activity

(Fitzsimmons, Fitzsimmons & Bordoloi .2014, p.6)

Stages of Economic Development

Society Game Pre- Use of Unit of Standard of Structure Technology
dominant Human Social Life living
activity Labour measure
Pre- Against Agriculture, Raw muscle Extended Subsistence Routine, Simple hand
industrial nature mining power household traditional, tools
(<18th C) authoritative

Industrial Against Goods, Tending Individual Quality of Bureaucratic, Machines

fabricated production machine goods hierarchical
nature

Post- Among Services Artistic, Community Quality of life Interdependent Information

industrial persons creative, in terms of
(>1950s) intellectual health,
education,
recreation

((Fitzsimmons, Fitzsimmons & Bordoloi .2014, p.8)

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 Learning Objective

 Explain the importance of services in

the world economy.

Service Growth

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5
 Services

Business Consultant Services Legal Adviser Services

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Different Services

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 Trends in U.S. Employment by Sector

Services:
Value from enhancing the
capabilities and interactions
among people
Goods:
Value from
Percent

making a product

Agriculture:
Value from
harvesting nature

Year
2022

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Share of
employment
(per cent) - Aus

78.28%

Source: Parliament of Australia (March 2018)

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 Employment by major industry sector -USA
Employment by major industry sector, 2006, 2016, and projected 2026

Thousands of Jobs Change Percent Distribution

Industry Sector
2006 2016 2026 2006–16 2016–26 2006 2016 2026

Total 148,988.20 156,063.80 167,582.30 7,075.70 11,518.50 100 100 100

137,190.90 144,979.30 155,724.80 7,788.40 10,745.50 92.1 92.9 92.9

Nonagriculture wage and salary

Goods-producing, excluding agriculture 22,466.70 19,685.20 19,904.20 -2,781.50 219 15.1 12.6 11.9

Mining 619.7 626.1 716.9 6.4 90.8 0.4 0.4 0.4

Construction 7,691.20 6,711.00 7,575.70 -980.2 864.7 5.2 4.3 4.5

Manufacturing 14,155.80 12,348.10 11,611.70 -1,807.70 -736.4 9.5 7.9 6.9

Services-providing excluding special industries 114,724.20 125,294.10 135,820.60 10,569.90 10,526.50 77 80.3 81

Utilities 548.5 556.2 559.6 7.7 3.4 0.4 0.4 0.3

Wholesale trade 5,904.60 5,867.00 6,012.80 -37.6 145.8 4 3.8 3.6

Retail trade 15,353.20 15,820.40 16,232.70 467.2 412.3 10.3 10.1 9.7

Transportation and warehousing 4,469.60 4,989.10 5,353.40 519.5 364.3 3 3.2 3.2

Information 3,037.90 2,772.30 2,824.80 -265.6 52.5 2 1.8 1.7

Financial activities 8,366.60 8,284.80 8,764.60 -81.8 479.8 5.6 5.3 5.2

Professional and business services 17,566.20 20,135.60 22,295.30 2,569.40 2,159.70 11.8 12.9 13.3

Educational services 2,900.90 3,559.70 4,066.20 658.8 506.5 1.9 2.3 2.4

Health care and social assistance 15,253.30 19,056.30 23,054.60 3,803.00 3,998.30 10.2 12.2 13.8

Leisure and hospitality 13,109.70 15,620.40 16,939.40 2,510.70 1,319.00 8.8 10 10.1

Other services 6,240.50 6,409.40 6,761.40 168.9 352 4.2 4.1 4

Federal government 2,732.00 2,795.00 2,739.20 63 -55.8 1.8 1.8 1.6

State and local government 19,241.20 19,427.90 20,216.60 186.7 788.7 12.9 12.4 12.1

Agriculture, forestry, fishing, and hunting(3) 2,111.20 2,351.50 2,345.40 240.3 -6.1 1.4 1.5 1.4

Agriculture wage and salary 1,218.60 1,501.00 1,518.00 282.4 17 0.8 1 0.9

Agriculture self-employed 892.6 850.5 827.5 -42.1 -23 0.6 0.5 0.5

Nonagriculture self-employed 9,686.00 8,733.00 9,512.10 -953 779.1 6.5 5.6 5.7

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Role of Services in an Economy

(Fitzsimmons, Fitzsimmons & Bordoloi .2014, p.5)

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 Section 1: End
 Discuss the role of services in an economy
and organisation.
 Explain the importance of services in the world
economy.

Section 2: Start
 Describe the characteristics that distinguish services from goods.
 Identify the driving forces behind the growth of services
 Discuss how these characteristics of services can be used to
arrive at service classifications.

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Learning Objective

 Describe the characteristics that

distinguish services from goods.

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 Services Vs Goods

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Category of services
 Distributive services : Transportation, communication, trade

 Producer services : Banking, insurance, engineering,

accounting, book keeping, legal services

 Social services: Health care, education, non-profit

organisations and government agencies

 Personal services: Tourism, dry cleaning, recreational

services, domestic services

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 Learning Objective

 Discuss the driving forces behind the

growth of services.

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Driving forces behind the growth of

services

 The impact of income changes on buying behaviour

 Sociological and demographic changes

 The growing importance of producer services

 Technological developments

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 Driving forces behind the growth of
services

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Learning Objective

 Discuss how these characteristics of

services can be used to arrive at service
classifications.

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 Distinctive characteristics of Services
“The service is an activity or series of activities for more on less intangible
nature that normally, but not necessarily, takes place in interactions
between the customer and service employees and/or physical resources or
goods and/or systems of the service provider, which are provided as
solution to customer problems.”
(Grönroos , cited in Gemmel et al. 2014, p.9-10)

Intangibility
Simultaneity
Heterogeneity
Perishability

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Distinctive characteristics of Services

Intangibility:
 Cannot be touched, tasted, smelled or seen.
 Cannot be tested, checked before buying or experiencing.
 Services are performed, goods are produced.
 Cannot take home but can take its effect.
 Need creative advertising.
 No patent protection.
 Importance of reputation.
 Degree of intangibility varies service to service.
 Experience and Credence plays a major role, compared
to Search.

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 Distinctive characteristics of Services
Simultaneity:
 Produced and consumed at same time.
 The customer takes part in production process and
consumes as it is being produced. Examples: Movie, lecture,
Restaurant food, Driver drives the taxi and passengers travel towards
destination
 Interaction creates customer perceptions of quality.
 Quality of the service depends on the ability of the
customer to specify or perform his or her part of the
service.

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Distinctive characteristics of Services

Heterogeneity:
Customer involvement in delivery process
results in variability
Varying customer requirements and
expectations
Varying service providers mood, abilities,
circumstances, timings.

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 Distinctive characteristics of Services

Perishability:
 Due to simultaneous production and
consumption – cannot be stored/ inventoried.
 Loss due to idle capacity.
 Need to match supply with demand.
 Capacity management is critical.
“Unused capacity in service organisations is rather like running tap in a sink with no plug: the
flow is wasted unless customers (possessions requiring servicing) are present to receive it.”
(Lovelock, cited in Gemmel et al, 2014, p.15)

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Service Classifications

Degree of Intangibility
Degree of Simultaneity
Degree of Heterogeneity
Degree of Perishability
Degree of Demand fluctuation over time
Degree of Service customisation
Degree of Labour intensity

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 Intangibility and Simultaneity

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Maister’s framework: Degree of contact Vs degree of

customisation

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 Summary
In this topic we :

 Discussed the role of services in a national economy and in

an organisation.

 Understood the importance of services in world economy.

 Identified the driving forces behind the growth of services.

 Described the characteristics that distinguish services from

goods.

 Discussed how these characteristics can be used to arrive at

service classifications.

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Questions?

Thank You

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