The Nature of Services

1
The Nature of Services
2
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.

3
Service/Product Bundle
Element Core Goods Example Core Service Example
Business Custom clothier Business hotel
Core Business suits Room for the night
Peripheral Goods Garment bag Bath robe
Peripheral Service Deferred payment plans In house restaurant
Variant Coffee lounge Airport shuttle
4
The Service Process Matrix

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

5
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.

6
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.

7
Unique Characteristics of Services

• Intangibility creative advertising, no patient
  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

8
Service Process Orientation

• 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

9
Strategic Service Classification (Nature of the
Service Act)

• 
  Direct Recipient of the Service
• Nature of
• the Service Act People
  Things
• 
  Peoples bodies
  Physical possessions
• 
  
  
• Health
  care
  Freight transportation
• 
  Passenger transportation
  Equipment repair and maintenance
• Tangible actions Beauty salons
  Veterinary care
• 
  Exercise clinics
  Janitorial services
• 
  Restaurants
  Laundry and dry cleaning
• 
  
• 
  Peoples minds
  Intangible assets
• 
  
• 
  Education
  Banking
• Intangible actions Broadcasting
  Legal
  services
• 
  Information services
  Accounting
• 
  Theaters
  Securities
• Museums
  
  Insurance

10
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
  Radio station
• 
  Telephone subscription
  Police protection
• Continuous delivery Electric Utility
  
  Lighthouse
• of service Banking
  
  Public Highway
• 
  Long-distance phone calls Restaurant
• 
  Theater series subscription
  Pay phone
• Discrete transactions Transit pass
  Toll
  highway
• 
  Sams Wholesale Club Movie theater
• 
  Airline frequent flyer
  Public transportation
• 
  
  
• 
  
  
• 
  
  

11
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
• 
  Professional services
  Education (large classes)
• 
  Surgery
  Preventive health programs
• 
  Taxi services
  Family restaurant
• High
  Gourmet restaurant
• 
  Telephone service
  Public transportation
• 
  Hotel services
  Spectator sport
• Low
  Retail banking (excl. major loans)
  Movie theater
• 
  Cafeteria
  Institutional food service
• 
  
  
  

12
Strategic Service Classification (Nature of
Demand and Supply)

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

13
Strategic Service Classification (Method of
Service Delivery)

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

14
Open Systems View of Service Operations

• 
  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

15
Village Volvos Service Package

• Supporting Facility
• Facilitating Goods
• Information
• Explicit Services
• Implicit Services

16
Village Volvos Distinctive Service
Characteristics

• Intangibility
• Perishability
• Heterogeneity
• Simultaneity
• Customer Participation in the Service Process

17
Village Volvos Service Classification

• Nature of the service act
• Relationship with customers
• Customization and judgement
• Nature of demand and supply
• Method of service delivery

18
Managing Village Volvo

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

19
Xpresso Lubes Service Package

• Supporting Facility
• Facilitating Goods
• Information
• Explicit Services
• Implicit Services

20
Xpresso Lubes Distinctive Service Characteristics

• Intangibility
• Perishability
• Heterogeneity
• Simultaneity
• Customer Participation in the Service Process

21
Xpresso Lubes Service Classifiction

• Nature of the service act
• Relationship with customers
• Customization and judgement
• Nature of demand and supply
• Method of service delivery

22
Xpresso Lube Questions

• What elements of Xpresso Lubes location
  contribute to its success?
• Given the example of Xpresso Lube, what other
  services could be combined to add value for the
  customer?

23
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
  firms image?

24
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.