2 Learning ObjectivesUnderstanding the managerial implications of the distinctive characteristics of a service operation.Describing a service using the four dimensions of the service package.Insights gained from strategic classifications of services.Challenges for management of service enterprises.
3 Proportion of Goods and Services in Purchase Bundle Goods Services100% %Self-service gasoline…………….Personal computer……………Office copier………………….Fast-food restaurant…………Gourmet restaurant…………Auto repair……………………Airline flight…………………….Haircut………………………….
4 Service/Product Bundle ElementCore GoodsExampleCore ServiceBusinessCustom clothierBusiness hotelCoreBusiness suitsRoom for the nightPeripheralGoodsGarment bagBath robeServiceDeferred payment plansIn house restaurantVariantCoffee loungeAirport shuttle
5 The Service Process Matrix Degree Degree of Interaction and Customizationof labor Intensity Low HighService factory: Service shop:* Airlines * HospitalsLow * Trucking * Auto repair* Hotels * Other repair services* Resorts and recreationMass service: Professional service:* Retailing * DoctorsHigh * Wholesaling * Lawyers* Schools * Accountants* Retail aspects of * Architectscommercial banking
6 The Service PackageSupporting 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 purchased or consumed by the buyer or items provided by the consumer. Examples are food items, auto parts, legal documents, golf clubs.
7 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.
8 The Servuction Service Model CustomerAInanimateEnvironmentInvisibleOrganizationAnd SystemCustomerBContactPersonnelor ServiceProviderInvisibleVisibleBundle of ServiceBenefits ReceivedBy Customer A
9 Unique Characteristics of Services Intangibility: creative advertising, no patient protection, importance of reputationPerishability: cannot inventory, opportunity loss of idle capacity, need to match supply with demandHeterogeneity: customer participation in delivery process results in variabilitySimultaneity: opportunities for personal selling, interaction creates customer perceptions of qualitySite Location: dictated by your customersCustomer Participation in the Service Process: attention to facility design but opportunities for co-productionDifficulty in measuring quality of output:
10 Service Process Orientation Customer as CoproducerFront and Back Office PerspectivesService Profit Chain Focus on Internal and External CustomersQuality (perceptions vs expectations)Focus on Both Efficiency and EffectivenessUse IT as Productivity Enabler for Both Internal and External Customers
11 Strategic Service Classification (Nature of the Service Act) Direct Recipient of the ServiceNature ofthe Service Act People ThingsPeople’s bodies: Physical possessions:Health care Freight transportationPassenger transportation Equipment repair and maintenanceTangible actions Beauty salons Veterinary careExercise clinics Janitorial servicesRestaurants Laundry and dry cleaningHaircutting Landscaping/lawn carePeople’s minds: Intangible assets:Education BankingIntangible actions Broadcasting Legal servicesInformation services AccountingTheaters SecuritiesMuseums Insurance
12 Strategic Service Classification (Relationship with Customers) Type of Relationship between Service Organization and Its CustomersNature ofService Delivery “Membership” relationship No formal relationshipInsurance Radio stationTelephone subscription Police protectionContinuous delivery College enrollment Lighthouseof service Banking Public HighwayAmerican Automobile associationLong-distance phone calls RestaurantTheater series subscription Mail serviceDiscrete transactions Commuter ticket or transit pass Toll highwaySam’s Wholesale Club Movie theaterEgghead computer software Public transportation
13 Strategic Service Classification (Customization and Judgment) Extent to Which Service Characteristics Are CustomizedExtent to Which PersonnelExercise Judgment in MeetingCustomer Needs High LowProfessional services Education (large classes)Surgery Preventive health programsTaxi services College food serviceHigh BeauticianPlumberGourmet restaurantTelephone service Public transportationHotel services Routine appliance repairLow Retail banking (excl. major loans) Movie theaterFamily restaurant Spectator sportsFast-food restaurant
14 Strategic Service Classification (Nature of Demand and Supply) Extent of Demand Fluctuation over TimeExtent to which SupplyIs Constrained Wide NarrowElectricity InsurancePeak demand can Natural gas Legal servicesusually be met Telephone Bankingwithout a major delay Hospital maternity unit Laundry and dry cleaningPolice and fire emergenciesAccounting and tax preparation Services similar to those abovePeak demand regularly Passenger transportation but with insufficient capacityexceeds capacity Hotels and motels for their base level ofRestaurants business
15 Strategic Service Classification (Method of Service Delivery) Availability of Service OutletsNature of Interactionbetween Customer andService Organization Single site Multiple siteCustomer goes to Theater Bus serviceservice organization Barbershop Fast-food chainService organization Lawn care service Mail deliverycomes to customer Pest control service AAA emergency repairsTaxiCustomer and service Credit card company Broadcast networkorganization transact at Local TV station Telephone companyarm’s length (mail orelectronic communications)
16 Open Systems View of Service Operations Service Process Consumer EvaluationConsumer arrivals Consumer participant departures Criteria(input) Consumer-Provider ( output) MeasurementinterfaceControl MonitorCustomer demand Service operations manager Service personnelProduction function:Perceived needs Alter Monitor and control process Schedule EmpowermentLocation demand Marketing function: supply TrainingInteract with consumers AttitudesControl demandModify as necessaryDefine standardService packageSupporting facilityCommunicate Facilitating goods Basis ofby advertising Explicit services selectionImplicit services
17 Topics for DiscussionWhat are the characteristics of services that will be most appropriate for Internet delivery? Which are not?Illustrate the “distinctive characteristics of service operations” for a service you are familiar with.What are some management problems associated with allowing service employees to exercise judgement in meeting customer needs?Comment on why hospitals, given they are so labor-intensive, are classified as a service shop?What factors are important for a manager to consider when attempting to enhance a service firm’s image?