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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.

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learning objectives
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 open-systems view of service.
the service process matrix
The Service Process Matrix

Degree Degree of Interaction and Customization

of labor IntensityLow High

Service factory: Service shop:

* Airlines * Hospitals

Low * Trucking * Auto repair

* Hotels * Other repair services

* Resorts and recreation

Mass service: Professional service:

* Retailing * Doctors

High * Wholesaling * Lawyers

* Schools * Accountants

* Retail aspects of * Architects

commercial banking

the service package
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
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.
unique characteristics of services
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 co-production
service process orientation
Service Process Orientation
  • 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
strategic service classification nature of the service act
Strategic Service Classification (Nature of the Service Act)

Direct Recipient of the Service

Nature of

the Service ActPeople Things

People’s bodies: Physical possessions:

Health care Freight transportation

Passenger transportation Equipment repair and maintenance

Tangible actions Beauty salons Veterinary care

Exercise clinics Janitorial services

Restaurants Laundry and dry cleaning

People’s minds: Intangible assets:

Education Banking

Intangible actions Broadcasting Legal services

Information services Accounting

Theaters Securities

Museums Insurance

strategic service classification relationship with customers
Strategic Service Classification (Relationship with Customers)

Type of Relationship between Service Organization and Its Customers

Nature of

Service Delivery“Membership” relationship No formal relationship

Insurance Radio station

Telephone subscription Police protection

Continuous delivery Electric Utility Lighthouse

of service Banking Public Highway

Long-distance phone calls Restaurant

Theater series subscription Pay phone

Discrete transactions Transit pass Toll highway

Sam’s Wholesale Club Movie theater

Airline frequent flyer Public transportation

strategic service classification customization and judgment
Strategic Service Classification (Customization and Judgment)

Extent to Which Service Characteristics Are Customized

Extent to Which Personnel

Exercise Judgment in Meeting

Customer Needs High Low

Professional services Education (large classes)

Surgery Preventive health programs

Taxi services Family restaurant

High Gourmet restaurant

Telephone service Public transportation

Hotel services Spectator sport

Low Retail banking (excl. major loans) Movie theater

Cafeteria Institutional food service

strategic service classification nature of demand and supply
Strategic Service Classification (Nature of Demand and Supply)

Extent of Demand Fluctuation over Time

Extent to which Supply

Is ConstrainedWide Narrow

Electricity Insurance

Peak demand can Telephone Legal services

usually be met Police emergency Banking

without a major delay Hospital maternity unit Laundry and dry cleaning

Tax preparation Fast food restaurant

Peak demand regularly Passenger transportation Movie theater

exceeds capacity Hotels and motels Gas station

strategic service classification method of service delivery
Strategic Service Classification (Method of Service Delivery)

Availability of Service Outlets

Nature of Interaction

between Customer and

Service OrganizationSingle site Multiple site

Customer travels to Theater Bus service

service organization Barbershop Fast-food chain

Service provider Taxi Mail delivery

travels to customer Pest control service AAA emergency repairs

Taxi

Transaction is at Credit card company Broadcast network

arm’s length Local TV station Telephone company

open systems view of service operations
Open Systems View of Service Operations

Service Process Consumer Evaluation

Consumer arrivals Consumer participant departures Criteria

(input) Consumer-Provider ( output) Measurement

interface

Control Monitor

Customer demandService operations managerService personnel

Production function:

Perceived needs Alter Monitor and control process Schedule Empowerment

Location demand Marketing function: supply Training

Interact with consumers Attitudes

Control demand

Modify as necessary

Define standard

Service package

Supporting facility

Communicate Facilitating goods Basis of

by advertising Explicit services selection

Implicit services

village volvo s service package
Village Volvo’s Service Package
  • Supporting Facility
  • Facilitating Goods
  • Information
  • Explicit Services
  • Implicit Services
village volvo s distinctive service characteristics
Village Volvo’s Distinctive Service Characteristics
  • Intangibility
  • Perishability
  • Heterogeneity
  • Simultaneity
  • Customer Participation in the Service Process
village volvo s service classification
Village Volvo’s Service Classification
  • Nature of the service act
  • Relationship with customers
  • Customization and judgement
  • Nature of demand and supply
  • Method of service delivery
managing village volvo
Managing Village Volvo
  • How could Village Volvo manage its back office (repair operations) like a factory?
  • How can Village Volvo differentiate itself from Volvo dealers?
xpresso lube s service package
Xpresso Lube’s Service Package
  • Supporting Facility
  • Facilitating Goods
  • Information
  • Explicit Services
  • Implicit Services
xpresso lube s distinctive service characteristics
Xpresso Lube’s Distinctive Service Characteristics
  • Intangibility
  • Perishability
  • Heterogeneity
  • Simultaneity
  • Customer Participation in the Service Process
xpresso lube s service classifiction
Xpresso Lube’s 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
Xpresso Lube Questions
  • What elements of Xpresso Lube’s 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
Topics for Discussion
  • What are the characteristicsof 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 firm’s image?
interactive class exercise
Interactive Class Exercise

The class breaks into five groups and each group is 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.