Service Management Ch. 2, The Nature of Services

Learning Objectives 1. Service-product bundle. 2. Distinctive characteristics of service operation 3. Non-ownership classification of services 4. Service package: five dimensions 5. Service process matrix: four categories 6. Strategic classification of services 7. Service manager: open-systems view

1. Service/Product Bundle Element Goods e.g. Service Business Custom clothier Business hotel Core Business suits Room for the night Peripheral Garment bag Bath robe Deferred payment plans In house restaurant Variant Coffee lounge Airport shuttle

2. Unique Characteristics of Services Customer Participation: co-production Simultaneity: interaction creates customer perceptions of quality Perishability: cannot inventory, opportunity loss of idle capacity, need to match supply with demand Intangibility: importance of reputation Heterogeneity: customer participation in delivery process results in variability

3. Non-ownership Classification of Services Type Customer value Examples Mgt Challenge Goods rental Obtain temporary right to exclusive use Vehicles Site selection & Maintenance Place and space rental Obtain exclusive use of defined portion Hotel room, seat on airplane Housekeeping Labor and Expertise Hire other people to do a job Car repair, management consulting time is perishable Physical facility usage Gain admission to a facility for a period of time Theme park Queuing Network usage Gain access to participate internet Availability & pricing

4. The Service Package Supporting Facility: golf course, ski lift, airplane. Facilitating Goods: legal documents, golf clubs, medical supplies. Information: seats available on a flight, location of customer to dispatch a taxi. Explicit Services: quality of meal, attitude of the waiter, on-time departure. Implicit Services: privacy of loan office, security of a well lighted parking lot.

5. The Service Process Matrix Degree Degree of Interaction and Customization of labor Intensity Low High Service factory: Service shop: * Airlines * Hospitals Low * Trucking * Auto repair * Hotels * Other repair services Mass service: Professional service: * Retailing * Physicians High * Wholesaling * Lawyers * Schools * Accountants

6. Strategic Service Classification 1 Direct Recipient Service Act People Things People’s bodies: Physical possessions: Health care Freight transportation Passenger transportation Equipment repair and maintenance Tangible actions Beauty salons Veterinary care Exercise clinics Restaurants People’s minds: Intangible assets: Education Banking Intangible actions Broadcasting Legal services Information services Accounting Theaters Securities Museums Insurance Laundry and dry cleaning

6. Strategic Service Classification 2 Relationship between Service Organization and Customers Service Delivery “Membership” No formal relationship Insurance Radio station Telephone subscription Police protection Continuous delivery Electric Utility Lighthouse of service Banking Public Highway Long-distance phone calls Restaurant Theater series subscription Pay phone Discrete transactions Transit pass Toll highway Sam’s Wholesale Club Movie theater Airline frequent flyer Public transportation

6. Strategic Service Classification 3 Customized Judgment High Low Professional services Education (large classes) Surgery Preventive health programs Taxi services Family restaurant Gourmet restaurant Telephone service Public transportation Hotel services Spectator sport Retail banking Movie theater Cafeteria Institutional food service High Low

6. Strategic Service Classification 4 Demand Fluctuation over Time Supply Is Constrained Wide Narrow Electricity Insurance Peak demand can Telephone Legal services usually be met Police emergency Banking without a major delay Hospital maternity unit Laundry and dry cleaning Tax preparation Fast food restaurant Peak demand regularly Passenger transportation Movie theater exceeds capacity Hotels and motels Gas station

6. Strategic Service Classification 5 Availability of Service Outlets Nature of Interaction Single site Multiple site Customer travels to Theater Bus service service organization Barbershop Fast-food chain Service provider Taxi Mail delivery travels to customer Pest control service AAA emergency repairs Transaction is at Credit card company Broadcast network arm’s length Local TV station Telephone company

7. Open Systems View 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 necessary Define standard Service package Supporting facility Facilitating goods Communicate Information Basis of by advertising Explicit services selection Implicit services

Topics for Discussion What are the characteristics of services that will be most appropriate for Internet delivery? When does collecting information through service membership become an invasion of privacy? What are some management problems associated with allowing service employees to exercise judgement in meeting customer needs? What factors are important for a manager to consider when attempting to enhance a service firm’s image?

Interactive Class Exercise The class breaks into five groups and each group is assigned one of the service classifications (e.g., nature of act, relationship with customer, customization, nature of demand, or method of delivery) to come up with an example for each of the four quadrants in the matrix. case：Southwest Airlines(P.30)