Slides for Chapter 11

Contribution of Services Industries to Global GDP

The concept of service

Grönroos (2001: 7) defines the service concept as: “.. an activity or series of activities of a more or less intangible nature that normally, but not necessarily, take place in the interaction between the customer and service”

A very insightful definition of a service comes from Fitzsimmons and Fitzsimmons (2007: 5)

“A Service is a Time-perishable, Intangible Experience Performed for a Customer Acting in the Role of a Co-producer”.

The Scope of Service

Grönroos claims that “every business is a service business” (Grönroos, 2000) and that “the product … becomes just one element in the total, ongoing service offering” (Grönroos, ibid).

Service Experience

As Pullman and Gross (2004, p. 553) explain:An experience occurs when a customer has any sensation or knowledge acquisition resulting from some level of interaction with different elements of a context created by a service provider. Successful experiences are those that the customer finds unique, memorable and sustainable overtime, would want to repeat and build upon, and enthusiastically promotes via word of mouth.

Service Dominant Logic

In S-D logic, service is defined as the application of specialized competences (operant resources—knowledge and skills), through deeds, processes, and performances for the benefit of another entity or the entity itself. It is important to note that S-D logic uses the singular term, “service,” which reflects the process of doing something beneficial for and in conjunction with some entity (Vargo and Lusch: 2008, 26)

Service Dominant Logic

“The emergent “service-dominant” logic challenges the view of buyers as passive consumers and includes buyers in the value creation process by asserting that the customer is always a co-creator of value ........... In this perspective, goods are merely “intermediate products that are used by other operant resources (customers) as appliances in value creation processes” (Vargo and Lusch 2004: 7). And: “Consumers act as resource integrators ......when they use their competence, tools, raw materials, and sometimes professional services to produce maintenance services, entertainment, meals, etc. for themselves”. (Xie et al 2008:109)

The “Moment of Truth” in Services

Once customers and suppliers engage in a transaction – both in consumer and business (B2B) settings - organizations must ensure that resources go into producing the services so that “The Moment of Truth” (Normann 1991) that takes place in this contact, is very positive.

See: http://www.youtube.com/watch?v=xmpDSBAh6RYWhen it doesn't go too well!

Service Experience

As Voss and Zomerdijk (2007, p6) rightly point out: “Every touch point a customer has with an organisation is an experience, no matter how mundane the product or service being delivered”

Failed Differentiation at Silverjet

•SUPER SERVICE No carts clog the aisles. All food and drink Is delivered by hand--a first for the industry. Silverjet hired its attendants primarily from hotels and restaurants. •BOYS, KEEP OUT Airplane lavatories are usually unisex, but Silverjet added a dedicated women's bathroom, an idea the CEO got from an outspoken female passenger at Heathrow. •BENDING DOWN A standard Boeing 767 has more than 200 seats. Silverjet has 100, which recline into 6-foot 3-inch beds. Cost: $2,200 for a round trip. •ECO-AWARE AIR With a fee of roughly $20 on every ticket, Silverjet is the first airline to completely offset the 124 tons of carbon dioxide released by each transatlantic flight. •TIME SAVINGS At London's Luton airport, passengers arrive at a private Silverjet terminal as little as 30 minutes before takeoff. The company has its own dedicated security process.

Source: Fortune 15th October 2007

Service Dominant Terminology

The Service Strategy Concept

Perceived Difference between Manufacturing and Services

• The product is intangible.• Services cannot be kept in stock.• Services vary and cannot be mass produced.• There is high customer contact.• Customers participate in the service.• Facilities are located near to customers.• Services are labour intensive.• Quality is difficult to measure.• Quality depends largely on the server

Classifications of physical service environments

Time spent in facility

Utilitarian Purpose of Consumption

Hedonic

MinutesHoursDays

Dry-cleanerTaxiPost officeHospital outpatientsSupermarketLawyerSchoolHospitalTraining centre

Coffee shopLecture theatreHairdresserBarAirport/aircraftMuseumHealth spaCaravan parkHotel

Games arcadeSaunaPlay parkShopping centreCasinoTheatreCruise linerTheme parkCoach tour

Source: Wilson, A., Zeithaml, V., Bitner, M. and Gremler, D. (2008)

Normann’s Service System

Servicedeliverysystem

Serviceimage

Serviceconcept

Marketsegment

Culture andphilosophy

The Iceberg Principle in Service operations

Key Points

The percentage of workers in the service sector has grown considerably since the 1960s and the contribution of services industries to global GDP is also vitally important across nations

Key Points

The need to focus is vitally important in managing services in order to move away from notions of ‘a service is a service’. Services need specific approaches and infrastructure for particular segments and industries.

Key Points

Old models of manufacturing versus services in operations management make little sense in an era where customers buy ‘an offer’ which includes experiences

Key Points

The input-output model has been challenged by service dominant logic that sees the customer as an input whereby operations works with and not just for the customer