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ServicesManagement
Introduction
FALL 2006
Why study Services?
• Service-based economies
• Service as a business imperative inmanufacturing and IT
• Deregulated industries and professionalservice needs
• Services marketing/management is different
• Service equals profits – follow the money
• It’s where the jobs are!!!
3
Course Logistics
• Website– http://www4.ncsu.edu/~montoya/SMsyllabus.html
– PPT files available by 12noon day of class
• eBook will be available in a week– Chapter copies for now
• Co-Production in action!!
Course Logistics
• Website– http://www4.ncsu.edu/~montoya/SMsyllabus.html
– PPT files available by 12noon day of class
• eBook will be available in a week– Chapter copies for now
• Co-Production in action!!
4
Introduction to Services
• Explain what services are and identify important trends inservices.
• Explain the need for special services management conceptsand practices and why the need has developed and isaccelerating.
• Explore the profound impact of technology on service.• Outline the basic differences between goods and services
and the resulting challenges and opportunities for servicebusinesses.
• Introduce the services variables and the philosophy ofcustomer focus, as powerful frameworks and themes formanaging services.
Service Definitions• Services are deeds, processes, and
performances.Valarie Zeithaml & Mary Jo Bitner
• A service is a time-perishable, intangibleexperience performed for a customer acting inthe role of a co-producer.
James Fitzsimmons
5
Definition of Service Firms Service enterprises are organizations that
facilitate the production and distribution ofgoods, support other firms in meeting theirgoals, and add value to our personal lives.
Role of Services in our Economy
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Percent Service Employment forSelected Nations
Country 1980 1987 1993 2000 United States 67.1 71.0 74.3 74.2 Canada 67.2 70.8 74.8 74.1 Israel 63.3 66.0 68.0 73.9 Japan 54.5 58.8 59.9 72.7 France 56.9 63.6 66.4 70.8 Italy 48.7 57.7 60.2 62.8 Brazil 46.2 50.0 51.9 56.5 China 13.1 17.8 21.2 40.6
01020
30405060
7080
1929 1948 1969 1977 1984 1999
Perc
ent o
f U.S
. Lab
or F
orce
Source: Survey of Current Business, April 1998, Table B.8, July 1988, Table 6.6B, and July 1992, Table 6.4C; EliGinzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): 31-39.
Year
Services Manufacturing Mining & Agriculture
Percent of U.S. Labor Forceby Industry
7
010
20304050
607080
1948 1959 1967 1977 1987 1999
Perc
ent o
f GD
P
Year
Source: Survey of Current Business, August 1996, Table 11, April 1998, Table B.3; Eli Ginzberg and George J.Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): 31-39.
Services Manufacturing Mining & Agriculture
Percent of U.S. GrossDomestic
Product by Industry
Examples of Service Industries• Health Care
– hospital, medical practice, dentistry, eye care• Professional Services
– accounting, legal, architectural
• Financial Services– banking, investment advising, insurance
• Hospitality– restaurant, hotel/motel, bed & breakfast– ski resort, rafting
• Travel– airline, travel agency, theme park
• Others– hair styling, pest control, plumbing, lawn maintenance, counseling
services, health club, interior design
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Contributions of Service Industriesto
U.S. Gross Domestic Product
Source: Inside Sam’s $100 Billion Growth Machine, by David Kirkpatrick, Fortune, June 14, 2004, p 86.
Figure 1.2
Tangibility Spectrum
TangibleDominant
IntangibleDominant
SaltSoft Drinks
DetergentsAutomobiles
Cosmetics
AdvertisingAgenciesAirlines
InvestmentManagement
ConsultingTeaching
Fast-foodOutlets
Fast-foodOutlets
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Characteristics of ServicesCompared to Goods
Intangibility
PerishabilitySimultaneous
Productionand
Consumption
Heterogeneity
Implications of Intangibility
• Services cannot be inventoried
• Services cannot be easily patented
• Services cannot be readily displayed orcommunicated
• Pricing is difficult
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Implications of Heterogeneity
• Service delivery and customer satisfactiondepend on employee and customer actions
• Service quality depends on many uncontrollablefactors
• There is no sure knowledge that the servicedelivered matches what was planned andpromoted
Implications of SimultaneousProduction and Consumption
• Customers participate in and affect the transaction
• Customers affect each other
• Employees affect the service outcome
• Decentralization may be essential
• Mass production is difficult
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Implications of Perishability
• It is difficult to synchronize supply and demandwith services
• Services cannot be returned or resold
Challenges for Services• Defining and improving quality• Designing and testing new services• Communicating and maintaining a consistent image• Accommodating fluctuating demand• Motivating and sustaining employee commitment• Coordinating marketing, operations, and human resource
efforts• Setting prices• Finding a balance between standardization versus
personalization• Ensuring the delivery of consistent quality
12
An Integrated Approach to ServiceManagement
The Eight Service Components (Variables) • 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 IT, Marketing, Operations, andHuman Resources
Service Variables
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Example Service/Product Bundle
Airport shuttleCoffee loungeVariant
In house restaurantDeferred paymentplans
Peripheral
Service
Bath robeGarment bagPeripheral
Goods
Room for the nightBusiness suitsCore
Business hotelCustom clothierBusiness
Core Service
Example
Core Goods
Example
Element
The Service Process Matrix
Degree of labor Intensity
Degree of Interaction and Customization
Low High
Low
Service factory* Airlines * Trucking * Hotels * Resorts and recreation
Service shop * Hospitals * Auto repair * Other repair services
High
Mass service: * Retailing * Wholesaling * Schools * Retail aspects of commercial banking
Professional service * Doctors * Lawyers * Accountants * Architects
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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 itemsprovided by the consumer. Examples are food items, legal documents,golf clubs, medical history.
• Information: Operations data or information that is provided by thecustomer to enable efficient and customized service. Examples arepatient medical records, seats available on a flight, customerpreferences, 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 arequality of meal, attitude of the waiter, on-time departure.
• Implicit Services: Psychological benefits or extrinsicfeatures which the consumer may sense only vaguely.Examples are privacy of loan office, security of a well lightedparking lot.
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Strategic Service ClassificationNature of the Service Act
Direct Recipient of the Service
Nature of
the Service Ac t
People
Things
Tangible actions
People’s bodies:
Health care
Passenger transportation
Beauty salons
Exercise clinics Restaurants
Physical possessions:
Freight transportation
Repair and maintenance
Veterinary ca re
Janitorial services Laundry and dry cleaning
Intangible ac tions
People’s minds:
Education
Broadcasting Information services
Theaters
Museums
Intangible assets:
Banking
Legal services Accounting
Securities
Insurance
Strategic Service ClassificationRelationship with Customers
Type of Relationship between Service Organization and Its Customers
Nature of Service Delivery
“Membership” relationship
No formal relationship
Continuous delivery
of service
Insurance
Telephone subscription
Electric Utility Banking
Radio station
Police protection
Lighthouse Publi c Highway
Discrete
transactions
Long-distance phone calls Theater series tickets
Transit pass
Sam’s Wholesale Club
Airline frequent flyer
Restaurant Pay phone
Toll highway
Movie theater
Public transportation
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Strategic Service ClassificationCustomization and Judgment
Extent to Which Service Characteristics Are Customized
Extent to Which Personnel Exercise Judgment in Meeting Customer Needs
High
Low
High
Surgery Taxi services Gourmet restaurant
Preventive health programs Education (large classes) Family restaurant
Low
Telephone service Hotel services Retail banking Cafeteria
Public transportation Spectator sports Movie theater Institutional food service
Strategic Service ClassificationNature of Demand and Supply
Extent of Demand Fluctuation over Time
Extent to which Supply
Is Constrained
Wide
Narrow
Peak demand can usually be met withou t
a major delay
Electricity Telephone
Police emergency
Hospital maternity unit
Insurance
Legal services
Banking
Laundry and dry cleaning
Peak demand regularly
exceeds capacity
Tax preparation Passenger transportation
Hotels and motels
Fast food restaurant Movie theater
Gas station
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Strategic Service ClassificationMethod of Service Delivery
Availability of Service Outlets
Nature of Interaction
between Customer and
Service Organization Single site Multiple site
Customer travels to service organization
Theater Barbershop
Bus service Fast -food chain
Service provide r
travels to customer
Tax i
Pest control service Taxi
Mail delivery
AAA emergency repairs
Transaction is at arm’s length
Credit card company Local TV station
Broadcast network Telephone company
Open Systems View ofServices
18
Xpresso Lube Facility
Xpresso Lube’s Service Package
• Supporting Facility
• Facilitating Goods
• Information
• Explicit Services
• Implicit Services
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Xpresso Lube’s DistinctiveService Characteristics
• Intangibility
• Perishability
• Heterogeneity
• Simultaneity
• Customer Participation in the Service Process
Xpresso Lube’s ServiceClassification
• Nature of the service act
• Relationship with customers
• Customization and judgement
• Nature of demand and supply
• Method of service delivery
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