Service: The New Frontier Service: The New Frontier Welcome to Service Management Service Management Professor Drew Rosen

Learning Objectives n Describe the central role of services in an economy. n To explore the differences between manufacturing and services. n Explore the role of services within manufacturing and manufacturing’s reliance on services. n Understanding service management/service operations n Describe and contrast the features of the new experience economy with that of previous economies.

Interactive Role of 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

The Service Revolution “There are no such things as service industries. There are only industries whose service components are greater or less then those of other industries. Everybody is in service”! Theodore Levitt

Global Employment, % Share

Percent Employment in Service Jobs, by Nation,

Growth In Employment Global Private Sector Services, , %

Services as % of GDP

Services Defined n Service Industry n Customer Service n Field Service

Why Services Are Important l Increased Competition l Manufacturing Support l Makes Economic Sense

“When the quality and price of competing products are similar or nearly identical, service activities can ‘differentiate’ undifferentiated products in the mind of the customer” Glaskowsky et al.

Relative Importance of Service Activities Relative Importance of Marketing Variables Product Price Service Sales Effort TOTAL All Industries All Manufacturing Chemicals & Plastics Mfg. Food Mfg Electronics Mfg. Paper Mfg. All Other Manufacturing All Merchandising Consumer Goods Merchandising Industrial Goods Merchandising National Council of Physical Distribution Management

Parallel Product/Service Design Product Concept Product Design Product Delivery Service Concept Service Design Service Delivery

Suppliers Tier 2 Suppliers Tier 1 Manufacturing Inbound Logistics Operations Outbound Logistics C U S T O M E R S Distributors Retailers The Supply Chain Information

Manufacturing Service Intermediary Commercial Services User (Self-Service) Consumer (Self-Service) R & D Product Design Distribution Services Wholesaling Retailing Repairing Service Industries Communications, Transportation, Utilities, Health Care, Banking, etc. Private Business Services Supporting Manufacturing, Accounting, Legal, Consulting, Software, Maintenance Government Support Services Waste Disposal Services, Road Maintenance, Education, Health Support, Standards, Police and Fire Protection, etc. Services Inside the Company--Design, Legal, Accounting Advertising, etc.

Service and Profitability n Reduced operating expenses n Competitive differentiation n Increased quality n Increased efficiency n Increased responsiveness n Increased market Share n Increased customer loyalty

Contributors to Market Share Market Share Time Market Share Due to Product Features Market Share Due to Captive Markets Market Share Due to Service Activities

% 40% 60% 80% 100% Very dissatisfied Dissatisfied Neutral SatisfiedVery satisfied Loyalty (Retention) Satisfaction zone of defection zone of indifference zone of affection Satisfaction and Loyalty terrorist apostle

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 (Fort Lauderdale 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 n Management Challenges Economies of Scale (MRI scanner) Economies of Scope(Convenience store) Complexity (Yield Management) Boundary Crossing (Bank vs Brokerage) International Competitiveness(Diversity)

Profits are the result of attention to quality and customer satisfaction, while the reverse is rarely true. Edwards Deming

Discussion Topics 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? What are the implications? n Comment on the role that marketing plays in the service innovation process. n Illustrate how the type of work he or she does influences a persons lifestyle.