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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.
 Discuss the insights obtained from a strategic
classification of services.
 Discuss the role of a service manager from an open-
systems view of service.
Unified Services Theory
 “With service processes, the customer
provides significant inputs to the production
process. With manufacturing processes,
groups of customers may contribute ideas to
the design of the product, but individual
customers’ only participation is to select and
consume the output. All managerial themes
unique to services are founded in this
distinction”
 Sampson, IJSIM 11:4 (2001).
Unified Service Theory Themes
 Service processes are distinguished from non-service
processes only by the presence of customer inputs
and implications thereof.
 For those familiar with business management in
general, understanding those additional issues
unique to managing services requires only
understanding the implications of customer inputs.
 Customer inputs are the root cause of the unique
issues and challenges of services management.
 Sampson and Froehle, POMJ 15:2 (2006)
Unique Characteristics of Services
 Intangibility: creative advertising, no patent
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
A Basic View: Services as a
Service/Product Bundle
Element Core Goods Core Service
Example Example
Business Custom clothier Business hotel

Core Good/Service Business suits Room for the night

Peripheral Garment bag Bath robe


Goods
Peripheral Deferred payment In house restaurant
Service plans
Variant Coffee lounge Airport shuttle
A More Elaborate View:
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.)
 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.
Understanding Service Processes:
The Service Process Matrix
Degree of Interaction and Customization
Low High
Service Factory: Service Shop:
* Airlines * Hospitals
Low * Trucking * Auto repair
* Hotels * Other repair services
Degree of * Resorts and recreation
labor Mass Service: Professional Service:
Intensity * Retailing * Doctors
High * Wholesaling * Lawyers
* Schools * Accountants
* Retail aspects of * Architects
commercial banking
Service Process Efficiency and
Effectiveness
 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
Classifying Services Through
Structural Positioning
 Classifications:
 The Nature of the Service Act
 Relationship with Customers
 Customization and Judgment
 Nature of Demand and Supply
 Method of Service Delivery

 Why do this?
 Who can I learn from?
 How can I differentiate myself?
Strategic Service Classification
(Nature of the Service Act)
Direct Recipient of the Service

People Things
Services Directed at Services Directed at Goods and
People’s Bodies: other Physical Possessions:
Healthcare Freight transportation
Tangible Passenger transportation Repair and maintenance
Actions Beauty salons Laundry and dry cleaning
Exercise clinics Veterinary care
Nature of Restaurants
the Service
Services Directed at Services Directed at Intangible
Act People’s Minds: Assets:
Education Banking
Intangible Broadcasting Legal services
Actions Information Services Accounting
Theaters Securities
Museums Insurance
Strategic Service Classification
(Relationship with Customers)
Type of Relationship between Service
Organization and its Customers
“Membership” Relationship No Formal Relationship

Insurance Radio station


Nature of Continuous Telephone subscription Police protection
Delivery of Electric Utility Lighthouse
the
Service Banking Public highway
Service
Delivery Long-distance phone calls Toll highway
Discrete Theater series tickets Pay phone
Transactions Transit pass Movie theater
Wholesale buying club Public transportation
Airline frequent flyer Restaurant
Strategic Service Classification
(Customization and Judgment)
Extent to which Service Characteristics are
Customized
High Low
Extent to which Surgery Education (large classes)
Customer Contact High Taxi service Preventive health programs
Personnel Gourmet restaurant Family restaurants
Exercise
Judgment in
Meeting Individual Telephone service Public transportation
Customer Needs Hotel services Movie theater
Low
Retail banking Spectator sports
Cafeteria Institutional food service
Strategic Service Classification
(Nature of Demand and Supply)
Extent of Demand Fluctuations over
Time
Wide Narrow

Peak demand can Electricity Insurance


usually be met Telephone Legal services
Extent to without delay Hospital maternity unit Banking
which Supply Police emergencies Laundry and dry cleaning
is
Constrained Peak demand Tax preparation Fast food restaurant
regularly exceeds Passenger transportation Movie theater
capacity Hotels and motels Gas station
Strategic Service Classification
(Method of Service Delivery)
Availability of Service Outlets
Single Site Multiple Site
Customer Travels Theater Bus service
to Service Firm Barbershop Fast food chain
Nature of
Interaction
Between Service Provider Pest control service Mail delivery
Customer and Travels to Taxi AAA emergency repairs
Customer
Service
Organization Transaction is at Credit card company National TV network
Arm’s Length Local TV station Telephone company
Service Operations:
An Open Systems View
Service Process Consumer Evaluation
Consumer arrivals Consumer participant departures Criteria
(input) Consumer-Provider ( output) Measurement
interface

Control Monitor

Customer Demand Service Operations Manager Service 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
Xpresso Lube’s Service Package
 Supporting Facility

 Facilitating Goods

 Information

 Explicit Services

 Implicit Services
Xpresso Lube’s Distinctive Service
Characteristics
 Intangibility

 Perishability

 Heterogeneity

 Simultaneity

 Customer Participation in the Service Process


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
 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
 What are the characteristics of 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
The class will break into five groups and each group
will be 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.

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