Managing Services

What Services have you consumed today?

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 1-3

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 1-4

Examples of Service Industries Health Care hospital, medical practice, dentistry, eye care Professional Services accounting, legal, architectural Financial Services banking, investment advising, insurance Hospitality restaurant, hotel/motel, bed & breakfast ski resort, rafting Travel airline, travel agency, theme park Others hair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design

Role of Services in an Economy INFRASTRUCTURE SERVICE · Communications · Transportation · Utilities · Banking PERSONAL SERVICES · Healthcare · Restaurants · Hotels CONSUMER (Self-service) GOVERNMENT SERVICES · Military · Education · Judicial · Police and fire protection DISTRIBUTION SERVICES · Wholesaling · Retailing · Repairing FINANCIAL SERVICES · Financing · Leasing · Insurance MANUFACTURING Services inside company: · Finance · Accounting · Legal · R&D and design BUSINESS SERVICES · Consulting · Auditing · Advertising · Waste disposal

Why Service Management?

Services dominate U.S. and worldwide economies Service as a business imperative in goods- focused businesses Deregulated industries and professional service needs Service management is different Service leads to profits

Contributions of Service Industries to U.S. Gross Domestic Product

Percent of U.S. Labor Force by Industry

Percent of U.S. Gross Domestic Product by Industry

Goods Vs. Services

Stages of Economic Activity Primary (Extractive): Agriculture, Mining, Fishing, Forestry Secondary (Goods-Producing): Manufacturing, Processing Tertiary (Domestic Services): Restaurants, Hotels, Laundry, Maintenance Quaternary (Trade and Commerce): Transportation, Communications, Retailing, Finance, Government Quinary (Extending Human Potential): Health, Education, Research, Arts, Recreation

Characteristics of Services Compared to Goods Intangibility Perishability Simultaneous Production and Consumption Heterogeneity

Examples of Goods Companies that are Expanding into Services Boeing

Comparing Goods and Services

Implications of Intangibility Services cannot be inventoried Services cannot be easily patented Services cannot be readily displayed or communicated Pricing is difficult 1-17

Implications of Heterogeneity Service delivery and customer satisfaction depend on employee and customer actions Service quality depends on many uncontrollable factors There is no sure knowledge that the service delivered matches what was planned and promoted 1-18

Implications of Simultaneous Production and Consumption Customers participate in and affect the transaction Customers affect each other Employees affect the service outcome Decentralization may be essential Mass production is difficult 1-19

Implications of Perishability It is difficult to synchronize supply and demand with services Services cannot be returned or resold 1-20

Service Vs. Retail How to differentiate

What is Retailing? Retailing – a set of business activities that adds value to the products sold to consumers for their personal or family use A retailer is a business that sells products to consumers for personal or family use.

Examples of Retailers Retailers: Kohl’s, Macy’s, Target, American Eagle Outfitter, Avon, J.Crew, Wal-Mart, Best Buy Firms that are retailers and wholesalers - sell to other business as well as consumers:wholesalers Office Depot, The Home Depot, Costco

Retailing Focuses on Merchandise Management Store Management

A Special Case – RestaurantsRestaurants

Tangibility Spectrum

Service as Experience

The Four Realms of an Experience

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)

Marketing Mix

Traditional Marketing Mix Elements an organization controls that can be used to satisfy or communicate with customers: Product Price Place Promotion 1-31

Expanded Mix for Services – The 7 Ps Product Price Place Promotion People Physical Evidence Process 1-32

Expanded Mix for Services People All human actors who play a part in service delivery and thus influence the buyer’s perceptions: namely, the firm’s personnel, the customer, and other customers in the service environment. Physical Evidence The environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service. Process The actual procedures, mechanisms, and flow of activities by which the service is delivered—the service delivery and operating systems. 1-33

Expanded Marketing Mix for Services 1-34

Ways to Use the 7 Ps Overall Strategic Assessment How effective is a firm’s service marketing mix? Is the mix well-aligned with overall vision and strategy? What are the strengths and weaknesses in terms of the 7 Ps? Specific Service Implementation Who is the customer? What is the service? How effectively does the service marketing mix for a service communicate its benefits and quality? What changes/ improvements are needed? 1-35

Future of Services

Typology of Services in the 21 st Century Core ExperienceEssential FeatureExamples CreativePresent ideasAdvertising, theater EnablingAct as intermediaryTransportation, communications ExperientialPresence of customerMassage, theme park ExtendingExtend and maintainWarranty, health check EntrustedContractual agreementService/repair, portfolio mgt. InformationAccess to informationInternet search engine InnovationFacilitate new conceptsR&D services, product testing Problem solvingAccess to specialistsConsultants, counseling Quality of lifeImprove well-beingHealthcare, recreation, tourism RegulationEstablish rules and regulationsEnvironment, legal, patents

Challenges and Questions for Service Managers Defining and improving quality Designing and testing new services Communicating and maintaining a consistent image Accommodating fluctuating demand Motivating and sustaining employee commitment Setting prices 1-38

Challenges and Questions for Service Managers Organizing to facilitate strategic and tactical decision-making Finding a balance between standardization and personalization Protecting new service concepts from competitors Communicating quality and value to customers Ensuring the delivery of consistent quality service 1-39

Technology & Customer Service

Eight Central Paradoxes of Technological Products - Table 1.1, page