1

Service Management (5e)

Operations, Strategy, Information Technology
By
Fitzsimmons and Fitzsimmons

Chapter – 1
Role of Service in an Economy
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Learning Objectives
 Describe the central role of services in an economy.
 Discuss the evolution of an economy from an agrarian
society to a service society.
 Describe the features of preindustrial, industrial, and
postindustrial societies.
 Describe the features of the new service economy
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Service Definitions
Services are deeds, processes, and performances.
Valarie Zeithaml & Mary Jo Bitner

A service is a time-perishable, intangible experience

performed for a customer acting in the role of a co-producer.
James Fitzsimmons
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Definition of Service Firms

Service enterprises are organizations that facilitate the
production and distribution of goods, support other firms in
meeting their goals, and add value to our personal lives.
James Fitzsimmons
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Role of Services in an Economy

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Percent Service Employment for Selected Nations

Country 1980 1987 1993 2000

United States 67.1 71.0 74.3 74.2
Canada 67.2 70.8 74.8 74.1
Israel 63.3 66.0 68.0 73.9
Japan 54.5 58.8 59.9 72.7
France 56.9 63.6 66.4 70.8
Italy 48.7 57.7 60.2 62.8
Brazil 46.2 50.0 51.9 56.5
China 13.1 17.8 21.2 40.6
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Trends in U.S. Employment by Sector

90
Proportation of total employement

80
70

60
50
40
30
20
10
0
50

70

90

10

30

50

70

90
18

18

18

19

19

19

19

19
Service
Year Manufacturing
Agriculture
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Stages of Economic Development

Pre- Use of Standard

Society dominant human Unit of of living
Game activity labor social life measure Structure Technology

Pre- Against Agriculture Raw Extended Sub- Routine Simple

Industrial Nature Mining muscle household sistence Traditional hand tools
power Authoritative
Industrial Against Goods Machine Individual Quantity Bureaucratic Machines
fabricated production tending of goods Hierarchical
nature
Post- Among Services Artistic Community Quality of Inter- Information
industrial Persons Creative life in dependent
Intellectual terms of Global
health,
education,
recreation
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The New Experience Economy

Economy Agrarian Industrial Service Experience

Function Extract Make Deliver Stage
Nature Fungible Tangible Intangible Memorable
Attribute Natural Standardized Customized Personal
Method of Stored in Inventoried Delivered on Revealed
supply bulk demand over time

Seller Trader Manufacturer Provider Stager

Buyer Market User Client Guest

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The Four Realms of an Experience

Customer Participation

Passive Active

Absorption Entertainment Education

Environmental (Movie) (Language)

Relationship Immersion Esthetic Escapist

(Tourist) (ScubaDiving)
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Experience Design Principles

 Theme the Experience (Forum shops)
 Harmonize Impressions with Positive Cues
(O’Hare airport parking garage)
 Eliminate Negative Cues
(Cinemark talking trash containers)
 Mix in Memorabilia (Hard Rock T-shirts)
 Engage all Five Senses (Mist in Rainforest)
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Source of Service Sector Growth

Innovation
Push theory (e.g. Post-it)
Pull theory (e.g. Cash Management)
Services derived from products (Video Rental)
Information driven services
Difficulty of testing service prototypes
Social Trends
Aging of the population
Two-income families
Growth in number of single people
Home as sanctuary