Welcome to Service Management Role of Services in an Economy Sincere congratulations to the entire Wolverine team! 17 consecutive quarter of record revenue and earnings per share is no small feat. Your brand portfolio is strong and covers much competitive space. the company has not been content with its success; and is looking to leverage its brands beyond food rather than across apparel and accessories. You have set ambitious goals for the future. FM : Anis Gunawan,MM anisg@pmbs.ac.id

Seay Professor of Business Emeritus University of Texas at Austin James Fitzsimmons Seay Professor of Business Emeritus University of Texas at Austin

Service Definitions Services are deeds, processes, and performances. Orlando Services are deeds, processes, and performances. Valarie Zeithaml & Mary Jo Bitner A service is a time-perishable, intangible experience performed for a customer acting in the role of a co-producer. James Fitzsimmons

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. James Fitzsimmons SM

Service Can Mean all of These Directory Academic Areas Centers & Institutes The Kenan Institute Contact Us   Kenan-Flagler Gear Service Can Mean all of These Service as a product Customer service Services as value add for goods Service embedded in a tangible product   UNC |    UNC Directory  Site Map   Equal Opportunity Policy   Terms of Use & Privacy Policy   Webmaster

Examples of Service Industries Health Care hospital, medical practice, dentistry, eye care Professional Services accounting, legal, architectural Financial Services banking, investment advising, insurance Hospitality restaurant, hotel/motel, bed & breakfast ski resort, rafting Travel airline, travel agency, theme park Others hair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design Airline

Challenges for Services Defining and improving quality Ensuring the delivery of consistent quality Designing and testing new services Communicating and maintaining a consistent image Accommodating fluctuating demand Motivating and sustaining employee commitment Coordinating marketing, operations, and human resource efforts Setting prices Finding a balance between standardization versus customization SQ

Why do firms focus on Services? Services can provide higher profit margins and growth potential than products Customer satisfaction and loyalty are driven by service excellence Services can be used as a differentiation strategy in competitive markets Jerome The are 3 main reasons why our program is focusing on services. It provides a higher profit margin than tangible products, Increases satisfaction and retention, Provides a competitive advantage over others. I am going to use two examples to illustrate these points. The automotive industry has typically been perceived as a manufacturing industry. However, after-sale services and parts account for nearly 80% of all revenue opportunities, and more than 50% of the average automobile dealer’s profits It is by far the largest creator of shareholder value on a percentage basis. A GM study revealed that $9 billion in after sale revenue produced $2 billion in profits (22% margin). Profits from $150 billion car sales were much lower. JD Power and Associates published a report showing a strong correlation between customer satisfaction with after-sale services and customer intent to repurchase the same brand (Lexus and Saturn cars) Hyundai’s success is due largely to its differentiation strategy of offering 10 year - 100,000 mile guarantee. The service offering is changing customer’s perception of the brand The same can be said about the personal computer industry. With the advancement of technology, personal computers are now becoming more and more of a commodity. While 25% of revenue opportunities are in the initial sale, most revenue opportunities are from after-sale. Company responsiveness to customer calls is the biggest driver customer satisfaction with its product. Dell revolutionized the industry by being the first to offer mass customization of personal computers. ------------------------- Across manufacturing companies, after-sale services and parts contributes about 25% of total revenue, and 40%-50% of all profits Services related revenue exceeds first-time product sales by 500% - 2000% Retail industry derive largest margins from sale of extended warranties It is a program that is designed in response to a business environment that is increasingly moving away from a product orientation to a service-focus GE, IBM other good examples. SQ

Implications of Intangibility Services cannot be inventoried Services cannot be easily patented Services cannot be readily displayed or communicated Pricing is difficult

Implications of Heterogeneity Service delivery and customer satisfaction depend on employee and customer actions Service quality depends on many uncontrollable factors There is no sure knowledge that the service delivered matches what was planned and promoted

Implications of Simultaneous Production and Consumption Customers participate in and affect the transaction Customers affect each other Employees affect the service outcome Decentralization may be essential Mass production is difficult

Implications of Perishability It is difficult to synchronize supply and demand with services Services cannot be returned or resold

Examples of Goods Companies that are Expanding into Services Kodak Boeing

Role of Services in an Economy BT Role of Services in an Economy NY INFRASTRUCTURE SERVICE · Communications · Transportation · Utilities · Banking FINANCIALSERVICES · Financing · Leasing · Insurance PERSONALSERVICE · Healthcare · Restaurants · Hotels MANUFACTURING Services inside company: · Finance · Accounting · Legal · R&D and design DISTRIBUTION SERVICES · Wholesaling · Retailing · Repairing CONSUMER (Self-service) Cons BUSINESS SERVICES · Consulting · Auditing · Advertising · Waste disposal GOVERNMENT SERVICES · Military · Education · Judicial · Police and fire protection

Percent Employment in Services Top Ten Postindustrial Nations Country 1965 1975 1985 1995 2005 United States 59.5 66.4 70.0 74.1 78.6 United Kingdom 51.3 58.3 64.1 71.4 77.0 The Netherlands 52.5 60.9 68.3 73.4 76.5 Sweden 46.5 57.7 66.1 71.5 76.3 Canada 57.8 65.8 70.6 74.8 76.0 Australia 54.6 61.5 68.4 73.1 75.8 France 43.9 51.9 61.4 Japan 44.8 52.0 57.0 68.6 Germany 41.8 n/a 51.6 60.8 68.5 Italy 36.5 44.0 55.3 62.2 65.5

Trends in U.S. Employment by Sector

Distribution of GDP in the US Economy Product Services Physical Information 6% 10% 31% 53% 37% 63% 84% 16% D B A C IBM

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

Economic Evolution Economy Agrarian Industrial Service Experience Offering Food Packaged goods Commodity service Consumer services Business services Function Extract Make Deliver Stage Co-create Nature Fungible Tangible Intangible Memorable Effectual Attribute Natural Standardized Customized Personal Growth Method of Supply Stored in bulk Inventoried Delivered on demand Revealed over time Sustained over time Seller Trader Producer Provider Stager Collaborator Buyer Market Customer Client Guest Expectation Quantity Features Benefits Sensations Capability

The Four Realms of an Experience

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

Typology of Services in the 21st Century Core Experience Essential Feature Examples Creative Present ideas Advertising, theater Enabling Act as intermediary Transportation, communications Experiential Presence of customer Massage, theme park Extending Extend and maintain Warranty, health check Entrusted Contractual agreement Service/repair, portfolio mgt. Information Access to information Internet search engine Innovation Facilitate new concepts R&D services, product testing Problem solving Access to specialists Consultants, counseling Quality of life Improve well-being Healthcare, recreation, tourism Regulation Establish rules and regulations Environment, legal, patents ORlando

in Services Management Case study in Services Management

Case : Marriot Hilton. When Tom and Ruth checked out of the Marriott Hilton Head Resort, they were each given a brief postage paid survey to complete and return through the mail. The survey asked 15 questions about their stay at the Marriott Resort. It covered such attributes as overall satisfaction, check-in speed/efficiency, cleanliness, decor and comfort of their room, friendliness and efficiency of the staff, quality of dining experience, quality of merchandise/gift shop, intention to return, and willingness to recommend to friends.

Question : What is the decision facing Marriot Hilton? What factors are important in understanding this decision situation? What are the alternatives? 4. What decision(s) do you recommend?

Question no 1 : What is the decision facing Marriot Hilton? What types of research have to Marriott conduct ?

Question no 2 : What factors are important in understanding this decision situation? Consumer behavior that covered such attributes as overall satisfaction, check-in speed/efficiency, cleanliness, decor and comfort of their room, friendliness and efficiency of the staff, quality of dining experience, quality of merchandise/gift shop, intention to return, and willingness to recommend

A) Complaint solicitation B) Critical incidents studies Question no 3 : What are the alternatives? A) Complaint solicitation B) Critical incidents studies C) Relationship surveys D) Trailer calls E) Lost customer research

Question no 4. What decision(s) do you recommend? D) Trailer calls