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Chapter 1
An Introduction to Services
WHAT IS A SERVICE?
The Distinction is Unclear:
The Scale of Market Entities&
The Molecular Model
WHAT IS A SERVICE?
In General:
Goods Objects, Devices, Things
Services Deeds, Efforts, Performances
THE BENEFIT CONCEPT
Encapsulation of benefits in the consumers mind Tide
Cleanliness Whiteness Motherhood
THE BENEFIT CONCEPT
Services deliver the bundle of benefits through the experience that is created for the consumer
The servuction model provides a framework for understanding the consumer’s experience
Invisible Visible
InanimateEnvironment
ContactPersonnel
OrServiceProvider
Invisibleorganizationand systems
Customer A
Customer B
The Servuction Model
Bundle of servicebenefits receivedby Customer A
THE INCREASING DEMAND FOR SERVICE KNOWLEDGE
Changes in management perspective The Industrial Model vs. The Market-
focused Model Growth in service sector employment Service sector contributions to the
world economy Deregulation
THE DEMAND FOR KNOWLDEGE:SERVICE SECTOR EMPLOYMENT
Service Sector Employment: 78% in United
States 73% in Great
Britain 62% in Japan 57% in Germany 90% of All Jobs by
2020
New Job Creation: 80% of All New Jobs
(1980-1990) 90% of All New Jobs
(1990-2000) 88% of All Jobs by
2005
*42% of Work Force is Providing Some Form of Personal Service
THE DEMAND FOR KNOWLEDGE:CONTRIBUTIONS TO THE ECONOMY
Economic impact: The service sector accounts for over
70% of the United States’ gross domestic product (GDP)
The majority of industries in the U.S. economy do not produce, they perform
THE DEMAND FOR KNOWLEDGE:THE IMPACT OF DEREGULATION
Between 1980-1992 U.S. airlines declined from 36 to 12 the number of trucking companies that failed
during the 1980s was more than the previous 45 years combined
commercial banks declined by 14%
Effect of Deregulations: No demand for services knowledge
when demand exceeded supply and competitive pressures were few
THE DEMAND FOR KNOWLEDGE:THE IMPACT OF DEREGULATION
Effect of Deregulations (continued):Knowledge is needed in nonprice issues:
customer service customer retention image enhancement transforming public contact personnel
into marketing-oriented personnel
THE INDUSTRIAL MODEL
Sales Revenues are a function of: location Strategies sales Promotions advertising
THE INDUSTRIAL MODEL (continued)
Labor and operating costs should be kept as low as possible better to rely on machines than
humans narrowly defined jobs
Leave little room for discretion believes most employees are
indifferent, unskilled, and incapable of completing complex tasks.
performance expectations are low wages are kept low few opportunities for advancement
THE INDUSTRIAL MODEL(continued)
Places a higher value on upper and middle managers
Replaces full-time personnel with part-time personnel to reduce costs
CONSEQUENCES OF THE INDUSTRIAL MODEL
(employee)
Guarantees a cycle-of-failure Encourages front-line personnel to be
indifferent to problems no opportunity for advancement (dead-
end jobs) poor pay
some companies let employees go before mandatory raises
CONSEQUENCES OF THE INDUSTRIAL MODEL
(employee) poor pay has created a new class of
migrant worker 16 million people now travel from one
short-term job to another superficial training
focuses only on product knowledge little, if any, company benefits
Prohibits employees from taking discretionary action
High employee turnover rate
CONSEQUENCES OF THE INDUSTRIAL MODEL
(customers) Customer dissatisfaction
2/3 of customer’s defect, not due to the product, but due to the unhelpfulness of the provider
flat and declining sales revenues Overall the industrial approach is bad
for: employees customers shareholders country
THE MARKET-FOCUSEDMANAGEMENT MODEL
Purpose of the firm is to serve the customer
Service delivery is the focus of the system and the overall differential advantage in terms of competitive advantage
The services triangle provides a framework for the services model
THE SERVICES TRIANGLE
Theservice
strategy
Thecustomer
Thesystems
The people
• The organizationexists to serve the needs of the people who serve the customer
• The companyexists to servethe customer
THE SERVICES TRIANGLE
1. Communicate the service strategy to the customer
2. Customer/employee interaction: greatest opportunity for gains and
losses moments-of-truth critical incidents
3. Customer/procedures & physical hardware A.T.M. machines cramped airline seats
4. Organizational systems may prevent
employees from giving good service5. Physical and administrative systems should flow logically from the
service strategy
6. Good service starts at the top*MGT. should “Walk What They Talk” and provide:
-sense of focus-clarity-priorities
THE SERVICES TRIANGLE
CHARACTERISTICS OF THE MARKET-FOCUSED MODEL
Believes employees want to do good work invests in people as much as machines technology is used to assist people (not
to monitor there every activity) data is made available to the front-line
CHARACTERISTICS OF THE MARKET-FOCUSED MODEL
(continued)
Recognizes that employee turnover and customer satisfaction are closely related tie pay to performance focus on selection and training of
personnel Ryder Truck
no training (41% turnover) received training (19% turnover)
better trained, provide better service, require less supervision
CHARACTERISTICS OF THE MARKET-FOCUSED MODEL
(continued)
Employ more full-time employees better for customers and employees companies that pay more are finding
that as a percentage of sales, labor costs are actually lower than industry averages