The Nature of Services Learning Objectives n

The Nature of Services

Learning Objectives n n n 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.

An Integrated Approach to Service Management The Eight Components • Product Elements • Place, Cyberspace, and Time • Promotion and Education • Price and Other User Outlays + Process + Productivity and Quality + People + Physical Evidence Require the Integration of Marketing, Operations, and Human Resources

Service/Product Bundle Element Business Core Goods Example Custom clothier Core Service Example Business hotel Core Business suits Peripheral Goods Peripheral Service Variant Garment bag Room for the night Bath robe Deferred payment plans In house restaurant Coffee lounge Airport shuttle

The Service Process Matrix Degree of Interaction and Customization of labor Intensity Low High Service factory: * Airlines * Trucking * Hotels * Resorts and recreation Service shop: * Hospitals * Auto repair * Other repair services Mass service: * Retailing * Wholesaling * Schools * Retail aspects of commercial banking Professional service: * Doctors * Lawyers * Accountants * Architects

The Service Package n n n 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. ) n n 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.

Distinctive Characteristics of Services n n n Customer Participation in the Service Process: attention to facility design but opportunities for coproduction 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 participation in delivery process results in variability

Strategic Service Classification (Nature of the Service Act) Direct Recipient of the Service Nature of the Service Act People’s bodies: Things Physical possessions: Health care Passenger transportation Tangible actions Freight transportation Repair and maintenance Beauty salons Exercise clinics Restaurants Veterinary care Janitorial services Laundry and dry cleaning People’s minds: Intangible assets: Education Intangible actions Banking Broadcasting Information services Theaters Museums Legal services Accounting Securities Insurance

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 Telephone subscription Continuous delivery of service Radio station Police protection Electric Utility Lighthouse Banking Public Highway Long-distance phone calls Theater series tickets Discrete transactions Restaurant Pay phone Transit pass Sam’s Wholesale Club Airline frequent flyer Toll highway Movie theater Public transportation

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 Surgery High Preventive health programs Education (large classes) Family restaurant Telephone service Hotel services Low Taxi services Gourmet restaurant Public transportation Spectator sports Retail banking Cafeteria Movie theater Institutional food service

Strategic Service Classification (Nature of Demand Supply) Extent of Demand Fluctuation over Time Extent to which Supply Is Constrained Wide Narrow Electricity Peak demand can usually be met without a major delay Insurance Telephone Legal services Banking Hospital maternity unit Laundry and dry cleaning Tax preparation Peak demand regularly exceeds capacity Police emergency Fast food restaurant Passenger transportation Movie theater Hotels and motels Gas station

Strategic Service Classification (Method of Service Delivery) Availability of Service Outlets Nature of Interaction between Customer and Service Organization Customer travels to service organization Service provider travels to customer Transaction is at arm’s length Single site Multiple site Theater Bus service Barbershop Fast-food chain Taxi Mail delivery Pest control service Taxi AAA emergency repairs Credit card company Broadcast network Local TV station Telephone company

Open Systems View of Services Service Process Consumer arrivals (input) Consumer Evaluation Consumer participant Consumer-Provider interface departures ( output) Criteria Measurement Control Customer demand Perceived needs Location Monitor Service operations manager Production function: Alter Monitor and control process Schedule demand Marketing function: supply Interact with consumers Control demand Modify as necessary Define standard Communicate by advertising Service package Supporting facility Facilitating goods Explicit services Implicit services Basis of selection Service personnel Empowerment Training Attitudes

Village Volvo’s Service Package n Supporting Facility n Facilitating Goods n Information n Explicit Services n Implicit Services

Village Volvo’s Distinctive Service Characteristics n Intangibility n Perishability n Heterogeneity n Simultaneity n Customer Participation in the Service Process

Village Volvo’s Service Classification n Nature of the service act n Relationship with customers n Customization and judgement n Nature of demand supply n Method of service delivery

Managing Village Volvo n How could Village Volvo manage its back office (repair operations) like a factory? n How can Village Volvo differentiate itself from Volvo dealers?

Xpresso Lube Facility

Xpresso Lube’s Service Package n Supporting Facility n Facilitating Goods n Information n Explicit Services n Implicit Services

Xpresso Lube’s Distinctive Service Characteristics n Intangibility n Perishability n Heterogeneity n Simultaneity n Customer Participation in the Service Process

Xpresso Lube’s Service Classification n Nature of the service act n Relationship with customers n Customization and judgement n Nature of demand supply n Method of service delivery

Beyond Xpresso Lube n What elements of Xpresso Lube’s location contribute to its success? n Given the example of Xpresso Lube, what other services could be combined to “add value” for the customer?

Topics for Discussion n n 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? What contributions to the management of professional service firms can a business school graduate provide?

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.