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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
The Nature of ServicesThe Nature of Services
This presentation is a modified version of the original presentation
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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.
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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
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Roadmap
The Service Process Matrix Service Package Distinctive Characteristics of Service
Operations Classification of services for strategic insight
The Service Process Matrix
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Service Process Matrix
Services are classified across two dimensions that significantly affect the service delivery process.
Degree of Labor Intensity Ratio of labor cost to capital cost.
(Labor Intensive (High) and Capital Intensive (Low))
Degree of Customer Interaction and Customization
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The Service Process Matrix
Degree of labor Intensity
Degree of Interaction and Customization
Low High Low
Service factory:
* Airlines * Hotels
Service shop:
* Hospitals * Auto repair
High
Mass service:
* Retailing * Schools
Professional service:
* Doctors * Architects
Managers of services in any category share similar challenges. There are some differences as well.
The Service Process Matrix
What are some of the issues of concern for each category identified in the Service Process Matrix?
(Please take a moment and think about this)
The Service Package
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The Service Package
Supporting Facility
Facilitating Goods
Information
Explicit Services
Implicit Services
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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 items provided by the consumer. Examples are food items, legal documents, golf clubs, medical history.
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The Service Package
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.
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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.
Distinctive Characteristics of Services
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Distinctive Characteristics of Services
Inputs Customers themselves
Resources Facilitating goods
Employees
Capital at the command of the service manager
Banking – focus is on processing information instead of people• IT such as electronic funds transfer can be substituted for
physically depositing a payroll check• Presence of the customer is unnecessary.
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Distinctive Characteristics of Services
Customer Participation in the Service Attention to facility – Web Portal feel
Process Simultaneity Created and consumed simultaneously.
Cannot be stored
Perishability Unused capacity is lost
Intangibility Services are ideas and concepts. Not
patentable. Perceptions
Heterogeneity Variation of service from customer to customer
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Distinctive Characteristics of Services
Customer Participation in the Service Process: attention to facility design but opportunities for co-production
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
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Strategic Service Classification (Nature of the Service Act)Strategic Service Classification (Nature of the Service Act)
Direct Recipient of the Service Nature of the Service Act
People
Things
Tangible actions
People’s bodies:
Health care Passenger transportation Beauty salons Exercise clinics Restaurants
Physical possessions:
Freight transportation Repair and maintenance Veterinary care Janitorial services Laundry and dry cleaning
Intangible actions
People’s minds:
Education Broadcasting Information services Theaters Museums
Intangible assets:
Banking Legal services Accounting Securities Insurance
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Strategic Service Classification (Relationship with Customers)Strategic Service Classification (Relationship 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 Public 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 Classification (Customization and Judgment)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
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
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Strategic Service Classification (Nature of Demand and Supply)Strategic Service Classification (Nature of Demand and Supply)
Extent of Demand Fluctuation over Time
Extent to which Supply Is Constrained
Wide
Narrow
Peak demand can usually be met without 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 Classification (Method of Service Delivery)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 service organization
Theater Barbershop
Bus service Fast-food chain
Service provider travels to customer
Taxi 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
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Summary
The Service Process Matrix Service Package Distinctive Characteristics of
Service Operations Classification of services for
strategic insight
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Village Volvo’s Service Package
Supporting Facility
Facilitating Goods
Information
Explicit Services
Implicit Services
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Village Volvo’s Distinctive Service Characteristics
Intangibility
Perishability
Heterogeneity
Simultaneity
Customer Participation in the Service Process
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Village Volvo’s Service Classification
Nature of the service act
Relationship with customers
Customization and judgement
Nature of demand and supply
Method of service delivery
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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?
