Service

Management
Understanding Services:
Nature of Service
Service Strategy

James & Mona Fitzsimmons/Sanjeev Bordoloi

ALLPPT.com _ Free PowerPoint Templates, Diagrams and Charts

Nature of Services
Sector Employment Labor Force Size
in Top 10 Nations by 2010
Nation

% World Labor

% Agri

% Goods

% Services

China

21

50

15

35

India

17

60

17

23

US

4.8

20

78

Indonesia

3.9

45

16

39

Brazil

3.0

23

24

53

Russia

2.5

12

23

65

Source: http://nationmaster.com

Role of Services in an Economy

Source: Guile & Quinn, Technology in Services, National Academy Press, 1988
FINANCIAL SERVICES
Financing
Leasing
Insurance

MANUFACTURING
Services inside company:
Finance
Accounting
Legal
R&D and design

BUSINESS SERVICES
Consulting
Auditing
Advertising
Waste disposal

INFRASTRUCTURE SERVICE
Communications
Transportation
Utilities
Banking

DISTRIBUTION
SERVICES
Wholesaling
Retailing
Repairing

PERSONAL SERVICES
Healthcare
Restaurants
Hotels

CONSUMER
(Self-service)

GOVERNMENT SERVICES
Military
Education
Judicial
Police and fire protection

1-3

What is Service?
Some definitions
Service is an activity or series of activities of more or less
intangible nature that normally take place in interaction
between customer and service employees and/or goods of the
service provider, which are provides as a solutions to customer
problems

Christian Gronroos, 1990

Services are deeds, processes, and performances.

Valarie Zeithaml & Mary Jo Bitner, 2006

A service is a time-perishable, intangible experience performed
for a customer acting in the role of a co-producer.

James Fitzsimmons, 2007

http://heybeb.com/
Click it

1. What is that?
2. Is it a service or a product?
What are the characteristics?
3. What are the core experience and
features?

Distinctive Characteristics of Services

Simultaneity
opportunities for personal selling, interaction
creates customer perceptions of quality
Perishability
cannot inventory, opportunity loss of idle
capacity, need to match supply with demand
Intangibility
creative advertising, no patent protection,
importance of reputation
Heterogeneity
customer involvement in delivery process
results in variability
Customer Participation in the Service Process
attention to facility design, opportunities for
co-production, concern for customer and
employee behavior

Typology of Services in the 21st Century

Core Experience

Essential Feature

Examples

Creative

Present ideas

Advertising, theater

Enabling

Act as intermediary

Transportation, communications

Experiential

Presence of customer

Massage, theme park

Extending

Extend and maintain

Warranty, health check

Entrusted

Contractual agreement

Service/repair, portfolio mgt.

Information

Access to information

Internet search engine

Innovation

Facilitate new concepts

R&D services, product testing

Problem solving

Access to specialists

Consultants, counseling

Quality of life

Improve well-being

Healthcare, recreation, tourism

Regulation

Establish rules and regulations

Environment, legal, patents

Source of Service Sector Growth

How Services can boost up its sales?
Information Technology (e.g. Internet)

Innovation
Push theory (e.g. Post-it)
Pull theory
Services derived from products
Exploiting information (e.g. Auto part sales)
Changing Demographics
Aging of the population
Two-income families
Growth in number of single people
Home as sanctuary

Service Package
A bundle of goods and services with information
that is provided in some environment.
Supporting Facility

Explicit Services
Bed, lab
drugs,
Med info
Pain absense
Courtesy doc

Service
Experience
Information

Implicit Services

Facilitating
Goods

Service Package (2)

Supporting Facility: The physical resources that must be
in place before a service can be sold.
Facilitating Goods: The material consumed by the
buyer or items provided by the consumer.
Information: Operations data or information that is
provided by the customer to enable efficient and
customized service.
Explicit Services: Benefits readily observable by the senses

Implicit Services: Psychological benefits or extrinsic features

which the consumer may sense only vaguely.

Service Process Matrix

*ratio labor cost to capital cost

Degree of labor intensity

Degree of interaction & customization

* customer ability to affect services
Airline

Hospitals

Hotel Resort

Auto Repair
Service

Service

Factory

Shop

Mass

Professional

Service

Service

Retailing

Lawyers

Schools

Accountants

Challenges for Service Managers

warm
Physical
surroundings
Rigid

quality
Employee
loyalty
Fighting cost
increases

hierarchy

Reacting to

Marketing

customer
intervention
in process

Capital
decision
Technologica

l advances
Managing
peaks and
off peaks

Technologica
l advances
Managing
peaks and
off peaks

High labor intensity

service

Maintain

Low labor intensity

Making

High customization

Low customization

Management problems are common across service industries

Hiring &
Training
Scheduling
workforces
Employee
welfare
Start-up new
units

Service Strategy
Porters 3 Generic Strategy

Overall Cost Leadership

Differentiation
Focus

Overall Cost Leadership

Lowest cost producer
Requirement

Approaches

High capital

Seeking out low-

investment

cost customer

Aggressive

Standardizing

pricing

Custom Service

Efficient-scale
facilities, tight
cost

Reducing
Personal Element

Reducing
Network Cost

Taking Service
Operation Offline

Differentiation
Unique services, creating customer loyalty
Requirement

Marketing
Research

Creative
development
team

Approaches
Making
intangible to
tangible

Customizing
standard product

Reducing
perceived risk

Giving attention
to personnel
training

Controlling
quality

Focus
Specific target market who offered lower cost or unique services

Requirement

Approaches

Lower investment

Segmenting the

in resources

market

Able to find
particular group

Setting

expectation below
performance

Jakarta Eye Center

Winning Customer in the marketplace

Service purchase decisions will be based on:

Qualifier
Trust
Price
Guarantee

Winner

Loser

Must be
Delighter (variety)
Customer choice
Dissatisfied for customer

Work in Group @ class

a. Create service packages for Aeon!

b. Identify its challenges related with service process matrix!
c. Identify how Aeon Mall can win the customer in Jakarta/Tangerang! (qualifier, winner, loser)

Next week
Present your business project by using
concept from this meeting (ch. 1,2)
Prepare a ppt handout for FM (readable)
Every group must be prepared