Wecome to Service Management

The Role of Services in an Economy

Ramesh Pooja Praful Avinash

Learning Objectives

Identify traits that all services have in common. Discuss the central role of services in an economy. Identify and differentiate the five stages of economic activity. Describe the features of preindustrial, industrial, and postindustrial societies. Describe the features of the new service economy. Contrast the push vs. pull theories of innovation. Identify the sources of service sector growth.

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

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

Percent Employment in Services

Top Ten Postindustrial Nations
Country United States United Kingdom The Netherlands 1975 66.4 58.3 60.9 1985 70.0 64.1 68.3 1995 74.1 71.4 73.4 2005 78.6 77.0 76.5

Sweden
Canada

57.7
65.8

66.1
70.6

71.5
74.8

76.3
76.0

Australia
France Japan Germany Italy

61.5
51.9 52.0 n/a 44.0

68.4
61.4 57.0 51.6 55.3

73.1
70.0 61.4 60.8 62.2

75.8
74.8 68.6 68.5 65.5

Role of Services in an Economy

FINANCIAL SERVICES Financing Leasing Insurance
INFRASTRUCTURE SERVICE Communications Transportation Utilities Banking

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

DISTRIBUTION SERVICES Wholesaling Retailing Repairing

PERSONAL SERVICES Healthcare Restaurants Hotels

CONSUMER (Self-service)

BUSINESS SERVICES Consulting Auditing Advertising Waste disposal

GOVERNMENT SERVICES Military Education Judicial Police and fire protection

Stages of Economic Activity

Health, Education, Research, Arts, Recreation

Quinary (Extending Human Potential):

Transportation, Communications, Retailing, Finance, Government

Quaternary (Trade and Commerce):

Tertiary (Domestic Services): Restaurants, Hotels, Laundry, Maintenance Secondary (Goods-Producing): Manufacturing, Processing Primary (Extractive): Agriculture, Mining, Fishing, Forestry

Proportation of total employement

10 20 30 40 50 60 70 80 90 0

1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
Service Agriculture Manufacturing Year

Trends in U.S. Employment by Sector

Stages of Economic Development

Society PreIndustrial Game Against Nature

Predominant Activity
Agriculture Mining

Use of Human Labor

Raw muscle power

Standard Unit of of Living Social Life Measure Structure

Extended household Subsistence

Technology

Routine Simple hand Traditional tools Authoritative Bureaucratic Machines Hierarchical

Industrial

Against Goods Machine Individual fabricated production tending nature Among Services Persons

Quantity of goods

Postindustrial

Artistic Community Quality of InterCreative life in terms dependent Intellectual health, education, recreation

Information

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Percent Distribution of U.S. Employment by Industry

Construction 5% Manufacturing 9%

Government 17%

Information 2%

Trade, transportation, and utilities 19%

Other services 4%

Financial activities 6%

Leisure and hospitality 10%

Educational and health 15%

Professional and business services 13%

The 21st Century Career

Percent Change in Wage and Salary Employment by Industry Sector, Projected 2006-2016

Projected Percent Change in U.S. Employment by Industry

All Industry Average Manufacturing

Agriculture and mining

Federal government Retail and wholesale trade State and local government Information Transportation and utilities

Construction
Other services Leisure and hospitality Financial services Educational services Professional and business services Health care and social assistance

-20%

-10%

0%

10%

20%

30%
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Economic Evolution
Economy Economic Offering Function Nature Attribute Method of Supply Seller Buyer Expectation Agrarian Food Industrial Packaged goods Make Tangible Standardized Inventoried Producer Customer Features Service Commodity service Deliver Intangible Customized Delivered on demand Provider Client Benefits Experience Consumer services Stage Memorable Personal Revealed over time Stager Guest Sensations Business services Co-create Effectual Growth Sustained over time Collaborator Collaborator Capability
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Extract Fungible Natural Stored in bulk Trader Market Quantity

The Four Realms of an Experience

Customer Participation Passive Active

Absorption Entertainment Education (Movie) (Language) Environmental Relationship Immersion Esthetic (Tourist) Escapist (ScubaDiving)

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Experience Design Principles

Theme the Experience (Forum shops) Harmonize Impressions with Positive Cues (OHare airport parking garage) Eliminate Negative Cues (Cinemark talking trash containers) Mix in Memorabilia (Hard Rock T-shirts) Engage all Five Senses (Mist in Rainforest)
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Typology of Services in the 21st Century

Core Experience Creative Enabling Essential Feature Present ideas Act as intermediary Examples Advertising, theater Transportation, communications

Experiential
Extending Entrusted Information Innovation

Presence of customer
Extend and maintain Contractual agreement Access to information Facilitate new concepts

Massage, theme park

Warranty, health check Service/repair, portfolio mgt. Internet search engine R&D services, product testing

Problem solving
Quality of life Regulation

Access to specialists
Improve well-being Establish rules and regulations

Consultants, counseling
Healthcare, recreation, tourism Environment, legal, patents
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Source of Service Sector Growth

Information Technology (e.g. Internet) Innovation Push theory (e.g. Post-it) Pull theory (e.g. Cash Management) Services derived from products (e.g. Netflix) Exploiting information (e.g. Auto part sales) Difficulty of testing service prototypes Changing Demographics Aging of the population Two-income families Growth in number of single people Home as sanctuary
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