ROLE AND NATURE OF

SERVICES
| Service Operation Management
 Chapter 1

Role of Services in an Economy

& The Nature of Services

McGraw-Hill/Irwin
Service Management: Operations,
 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

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 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
 STAGES OF ECONOMIC ACTIVITY

Primary Extractive Agriculture, mining, fishing, forestry

Secondary Goods processing Manufacturing, processing

Tertiary Domestic service Restaurant & hotels, barber & beauty

shop, laundry & dry cleaning,
maintenance & repair
Quaternar Trade & commerce Transportation, retailing,
y service communication, finance & insurance,
real estate
Quaternar Refining and Health care, education, research,
y extending human recreation, arts
capacities
 Role of Services in an Economy

FINANCIAL INFRASTRUCTURE SERVICE

SERVICES Communications
Financing Transportation
Leasing Utilities
Insurance Banking

PERSONAL
MANUFACTURING SERVICES
Services inside company: Healthcare
Finance DISTRIBUTION Restaurants
Accounting SERVICES Hotels
Legal Wholesaling
R&D and design Retailing
Repairing CONSUMER
(Self-service)

BUSINESS
SERVICES GOVERNMENT SERVICES
Consulting Military
Auditing Education
Advertising Judicial
Waste disposal Police and fire protection
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 Stages of Economic Development

Pre- Use of Standard

dominant Human Unit of of Living
Society Game Activity Labor Social Life Measure Structure Technology

Pre- Against Agriculture Raw Extended Sub- Routine Simple

hand
Indstrial Nature Mining muscle household sistence Traditional tools
power Authoritative

Industrial Against Goods Machine Individual Quantity Bureaucratic

Machines
fabricated production tending of goods Hierarchical
nature

Post- Among Services Artistic Community Quality of Inter-

Information
industrial Persons Creative life in terms dependent
Intellectual health,
education,
recreation

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 Stages of Economic Development

Service economy has moved from transactional

nature to experience-based relationship (refer next
slide)

In experience base we have

Customer services

Business services
 Economic Evolution
Engaging with consumer in a personal & memorable way
Economy Agrarian Industrial Service Experience
Consumer becomes the co-producer and input to the service process

Economic Food Packaged Commodity Consumer Business

Offering goods service services services

Function Extract Make Deliver Stage Co-create

Nature Fungible Tangible Intangible Memorable Effectual

Attribute Natural Standardize Customized Personal Growth

d
Method of Stored in Inventoried Delivered Revealed Sustained
Supply bulk on over time over
demand time

Seller Trader Producer Provider Stager Collaborator

Buyer Market Customer Client Guest Collaborator

Expectation Quantity Features Benefits Sensations Capability 1-9

 Distinctive Characteristics of Services

Simultaneity: buying and selling happens at one go

Perishability: time-perishable (will die off) capacity
Intangibility: depends on the reputation of the firm
and advertising
Heterogeneity: more than one element has to be
present
Customer Participation in the Service Process:
customer plays an active part in the process

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 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.

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 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.

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 Service Package: Banking

Supporting Facility
Building, machine and people
Facilitating Goods
money, transaction, security, documents
Information
about the customers, where the transactions
done
Explicit Services
immediate attention given, on-time transaction
Implicit Services
quality, privacy (experienced by consumers)
 Challenges For Service Managers

SERVICE FACTORY SERVICE SHOP

Airlines Hospitals
Capital decision
Trucking Auto repair Technological changes
Hotels Other repair services Managing demand
Resorts and recreation
Scheduling service delivery
 Challenges For Service Managers

SERVICE SHOP

Hospitals Fighting cost increase

Auto repair
Other repair services
Maintain quality
Reacting to consumer
Managing advancement of people
PROFESSIONAL SERVICE
Managing flat hierarchy with loose employer-
Doctors employee relationships
Lawyers
Accountants Gaining employee loyalty
Architects
 Challenges For Service Managers

MASS SERVICE PROFESSIONAL Hiring

SERVICE Training
Retailing
Wholesaling Doctors
Employee welfare
Schools Lawyers Scheduling workforce
Retail banking Accountants Start-up of new units
Architects
Managing growth
 Challenges For Service Managers

SERVICE SHOP

Hospitals
Auto repair
Marketing
Other repair services Making service warm
Attention to physical surrounding
MASS SERVICE Managing rigid hierarchy with the
need for standard operating
Retailing
Wholesaling
procedure
Schools
Retail banking
 Services can be classified base on various
strategic insights, such as
Nature of the service act (tangible action and
intangible action)
Relationship with customers and the nature of
delivery
Degree of customization and the judgment involved
in meeting customer needs
Extent of demand fluctuation and demand capacity
Nature of service delivery and service availability
 Source of Service Sector Growth

Information Technology (e.g. Internet)

Innovation

Changing Demographics
Aging of the population
Two-income families
Growth in number of single people
Home as sanctuary

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End of Lecture