Role of Services in an Economy Role of Services in an Economy Welcome to Service Management Service Management Professor James Fitzsimmons University of Texas at Austin

Learning Objectives n Describe the central role of services in an economy. n Discuss the evolution of an economy from an agrarian society to a service society. n Describe and contrast the features of the new experience economy with that of previous economies. n Describe the features of the new service economy n Discuss the role of service managers with respect to innovation, social trends, and management challenges.

Interactive Model of an Economy Business services Public administration Infrastructure services Trade services Extractive sector Manufacturing sector Customer Social/personal services

Service Definitions A Service is a Time-perishable, Intangible Experience Performed for a Customer Acting in the Role of a Coproducer. A Service is a Time-perishable, Intangible Experience Performed for a Customer Acting in the Role of a Coproducer. James Fitzsimmons James Fitzsimmons Services are deeds, processes, and performances. Services are deeds, processes, and performances. Valarie Zeithaml & Mary Jo Bitner

Definition of Service Firms Service Enterprises are Organizations that Facilitate the Production and Distribution of Goods, Support Other Firms in Meeting Their Goals, and Add Value to Our Personal Lives. Service Enterprises are Organizations that Facilitate the Production and Distribution of Goods, Support Other Firms in Meeting Their Goals, and Add Value to Our Personal Lives. James Fitzsimmons James Fitzsimmons

Stages of Economic Development Features Features Pre- Use of Standard Pre- Use of Standard dominant human Unit of of living dominant human Unit of of living Society Game activity labor social life measure Structure Technology Society Game activity labor social life measure Structure Technology Pre- Against Agriculture Raw Extended Sub- Routine Simple hand Pre- Against Agriculture Raw Extended Sub- Routine Simple hand Industrial Nature Mining muscle household sistence Traditional tools Industrial Nature Mining muscle household sistence Traditional tools power Authoritative power Authoritative Industrial Against Goods Machine Individual Quantity Bureaucratic Machines Industrial Against Goods Machine Individual Quantity Bureaucratic Machines fabricated production tending of goods Hierarchical fabricated production tending of goods Hierarchical nature nature Post- Among Services Artistic Community Quality of Inter- Information Post- Among Services Artistic Community Quality of Inter- Information industrial Persons Creative life in terms dependent industrial Persons Creative life in terms dependent Intellectual of health, Global Intellectual of health, Global education, education, recreation recreation

Trends in U.S. Employment by Sector

Percent Service Employment for Selected Industrialized Nations Country United States Canada Japan France Israel Italy China

The New Experience Economy

The Four Realms of an Experience

Experience Design Principles n Theme the Experience (Forum shops) n Harmonize Impressions with Positive Cues (O’Hare airport parking garage) n Eliminate Negative Cues (Cinemark talking trash containers) n Mix in Memorabilia (Hard Rock T-shirts) n Engage all Five Senses (Mist in Rainforest)

Role of the Service Manager n Entrepreneurial Innovation n Capitalizing on Social Trends (the aging of the U.S. population, the two-income family, growing number of single people) n Management Challenges Economies of Scale (MRI scanner) Economies of Scope(Convenience store) Complexity (Yield Management) Boundary Crossing (Bank vs Brokerage) International Competitiveness(Diversity)

Discussion Topics n Illustrate how the type of work he or she does influences a person’s lifestyle. n Is it possible for an economy to be based entirely on services? n Speculate on the effect that the Internet will have on the delivery of services. n What is the value of self-service in an economy? n Comment on the role that marketing plays in the service innovation process.