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The Nature of Services
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Learning Objectives
Understanding the managerial implications ofthe distinctive characteristics of a serviceoperation.
Describing a service using the fourdimensions of the service package.
Insights gained from strategic classificationsof services.
Challenges for management of serviceenterprises.
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Proportion of Goods and Services
in Purchase Bundle
Goods Services
100% 75 50 25 0 25 50 75 100%
Self-service gasoline.
Personal computer
Office copier.
Fast-food restaurant
Gourmet restaurant
Auto repair
Airline flight.
Haircut.
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Service/Product Bundle
Element Core GoodsExample
Core ServiceExample
Business
Custom clothier Business hotel
Core Business suits Room for thenight
Peripheral
Goods
Garment bag
Bath robe
PeripheralService
Deferredpayment plans
In houserestaurant
Variant
Coffee lounge Airport shuttle
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The Service Process Matrix
Degree Degree of Interaction and Customization
of labor Intensity Low HighService 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
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The Service Package
Supporting Facility: The physicalresources that must be in place before a
service can be sold. Examples are golfcourse, ski lift, hospital, airplane.
Facilitating Goods: The material
purchased or consumed by the buyer oritems provided by the consumer.Examples are food items, auto parts,legal documents, golf clubs.
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The Service Package (cont.)
Explicit Services: Benefits readilyobservable by the senses. The
essential or intrinsic features. Examples are quality of meal, attitude
of the waiter, on-time departure.
Implicit Services: Psychologicalbenefits or extrinsic features which theconsumer may sense only vaguely.
Examples are privacy of loan office,ri f w ll li h rkin l .
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The Servuction Service Model
CustomerA
CustomerB
Bundle of ServiceBenefits Received
By Customer A
InanimateEnvironment
ContactPersonnelor ServiceProvider
VisibleInvisible
InvisibleOrganizationAnd System
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Unique Characteristics of Services
Intangibility: creative advertising, no patientprotection, importance of reputation
Perishability: cannot inventory, opportunity loss ofidle capacity, need to match supply with demand
Heterogeneity: customer participation in deliveryprocess results in variability
Simultaneity: opportunities for personal selling,interaction creates customer perceptions of quality
Site Location: dictated by your customers Customer Participation in the Service Process:
attention to facility design but opportunities for co-production
Difficulty in measuring quality of output:
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Strategic Service Classification
(Nature of the Service Act)
Direct Recipient of the Service
Nature of
the Service Act People ThingsPeoples 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
Haircutting Landscaping/lawn care
Peoples minds: Intangible assets:
Education Banking
Intangible actions Broadcasting Legal services
Information services Accounting
Theaters Securities
Museums Insurance
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Strategic Service Classification
(Relationship with Customers)
Type of Relationship between Service Organization and Its Customers
Nature of
Service Delivery Membership relationship No formal relationshipInsurance Radio station
Telephone subscription Police protection
Continuous delivery College enrollment Lighthouse
of service Banking Public Highway
American Automobile association
Long-distance phone calls Restaurant
Theater series subscription Mail service
Discrete transactions Commuter ticket or transit pass Toll highway
Sams Wholesale Club Movie theater
Egghead computer software Public transportation
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Strategic Service Classification
(Customization and Judgment)
Extent to Which Service Characteristics Are Customized
Extent to Which Personnel
Exercise Judgment in Meeting
Customer Needs High LowProfessional services Education (large classes)
Surgery Preventive health programs
Taxi services College food service
High Beautician
Plumber
Gourmet restaurant
Telephone service Public transportation
Hotel services Routine appliance repair
Low Retail banking (excl. major loans) Movie theater
Family restaurant Spectator sports
Fast-food restaurant
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Strategic Service Classification
(Nature of Demand and Supply)
Extent of Demand Fluctuation over Time
Extent to which Supply
Is Constrained Wide NarrowElectricity Insurance
Peak demand can Natural gas Legal services
usually be met Telephone Banking
without a major delay Hospital maternity unit Laundry and dry cleaning
Police and fire emergencies
Accounting and tax preparation Services similar to those above
Peak demand regularly Passenger transportation but with insufficient capacity
exceeds capacity Hotels and motels for their base level ofRestaurants business
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Strategic Service Classification
(Method of Service Delivery)
Availability of Service Outlets
Nature of Interaction
between Customer and
Service Organization Single site Multiple site
Customer goes to Theater Bus service
service organization Barbershop Fast-food chain
Service organization Lawn care service Mail delivery
comes to customer Pest control service AAA emergency repairs
Taxi
Customer and service Credit card company Broadcast network
organization transact at Local TV station Telephone company
arms length (mail or
electronic communications)
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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 necessaryDefine standard
Service package
Supporting facility
Communicate Facilitating goods Basis of
by advertising Explicit services selection
Implicit services
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Topics for Discussion
What are the characteristicsof services that will bemost appropriate for Internet delivery? Which arenot?
Illustrate the distinctive characteristics of serviceoperations for a service you are familiar with.
What are some management problems associatedwith allowing service employees to exercise
judgement in meeting customer needs?
Comment on why hospitals, given they are so labor-intensive, are classified as a service shop?
What factors are important for a manager to considerwhen attempting to enhance a service firms image?
