1. The Nature of Services

2. Learning Objectives
Classify a service into one of four categories using the service process matrix.
Describe a service using the four dimensions of the service package.
Discuss the managerial implications of the distinctive characteristics of a service operation.
Discuss the insights obtained from a strategic classification of services.
Discuss the role of a service manager from an open-systems view of service.

3. An Integrated Approach to Service Management
The Eight Components • Product Elements • Place, Cyberspace, and Time • Promotion and Education • Price and Other User Outlays + Process + Productivity and Quality + People + Physical Evidence
Require the Integration of Marketing, Operations, and Human Resources

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

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
* Resorts and recreation
Mass service: Professional service:
* Retailing * Doctors
High * Wholesaling * Lawyers
* Schools * Accountants
* Retail aspects of * Architects
commercial banking

6. The Service Package
Supporting Facility: The physical resources that must be in place before a service can be sold. Examples are golf course, ski lift, hospital, airplane.
Facilitating Goods: The material consumed by the buyer or items provided by the consumer. Examples are food items, legal documents, golf clubs, medical history.
Information: Operations data or information that is provided by the customer to enable efficient and customized service. Examples are patient medical records, seats available on a flight, customer preferences, location of customer to dispatch a taxi.

7. The Service Package (cont.)
Explicit Services: Benefits readily observable by the senses. The essential or intrinsic features. Examples are quality of meal, attitude of the waiter, on-time departure.
Implicit Services: Psychological benefits or extrinsic features which the consumer may sense only vaguely. Examples are privacy of loan office, security of a well lighted parking lot.

8. Distinctive Characteristics of Services
Customer Participation in the Service Process: attention to facility design but opportunities for co-production
Simultaneity: opportunities for personal selling, interaction creates customer perceptions of quality
Perishability: cannot inventory, opportunity loss of idle capacity, need to match supply with demand
Intangibility: creative advertising, no patent protection, importance of reputation
Heterogeneity: customer participation in delivery process results in variability

9. Strategic Service Classification (Nature of the Service Act)
Direct Recipient of the Service
Nature of
the Service Act People Things
People’s bodies: Physical possessions:
Health care Freight transportation
Passenger transportation Repair and maintenance
Tangible actions Beauty salons Veterinary care
Exercise clinics Janitorial services
Restaurants Laundry and dry cleaning
People’s minds: Intangible assets:
Education Banking
Intangible actions Broadcasting Legal services
Information services Accounting
Theaters Securities
Museums Insurance

10. Strategic Service Classification (Relationship with Customers)
Type of Relationship between Service Organization and Its Customers
Nature of
Service Delivery “Membership” relationship 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 tickets Pay phone
Discrete transactions Transit pass Toll highway
Sam’s Wholesale Club Movie theater
Airline frequent flyer Public transportation

11. Strategic Service Classification (Customization and Judgment)
Extent to Which Service Characteristics Are Customized
Extent to Which Personnel
Exercise Judgment in Meeting
Customer Needs High Low
Surgery Preventive health programs
High Taxi services Education (large classes) Gourmet restaurant Family restaurant
Telephone service Public transportation
Hotel services Spectator sports
Low Retail banking Movie theater
Cafeteria Institutional food service

12. Strategic Service Classification (Nature of Demand and Supply)
Extent of Demand Fluctuation over Time
Extent to which 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

13. Strategic Service Classification (Method of Service Delivery)
Availability of Service Outlets
Nature of Interaction
between Customer and
Service Organization 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
Taxi
Transaction is at Credit card company Broadcast network
arm’s length Local TV station Telephone company

14. Open Systems View of Services
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
Communicate Facilitating goods Basis of
by advertising Explicit services selection
Implicit services

15. Village Volvo’s Service Package
Supporting Facility
Facilitating Goods
Information
Explicit Services
Implicit Services

16. Village Volvo’s Distinctive Service Characteristics
Intangibility
Perishability
Heterogeneity
Simultaneity
Customer Participation in the Service Process

17. Village Volvo’s Service Classification
Nature of the service act
Relationship with customers
Customization and judgement
Nature of demand and supply
Method of service delivery

18. Managing Village Volvo
How could Village Volvo manage its back office (repair operations) like a factory?
How can Village Volvo differentiate itself from Volvo dealers?

19. Xpresso Lube Facility

20. Xpresso Lube’s Service Package
Supporting Facility
Facilitating Goods
Information
Explicit Services
Implicit Services

21. Xpresso Lube’s Distinctive Service Characteristics
Intangibility
Perishability
Heterogeneity
Simultaneity
Customer Participation in the Service Process

22. Xpresso Lube’s Service Classification
Nature of the service act
Relationship with customers
Customization and judgement
Nature of demand and supply
Method of service delivery

23. Beyond Xpresso Lube
What elements of Xpresso Lube’s location contribute to its success?
Given the example of Xpresso Lube, what other services could be combined to “add value” for the customer?

24. 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?
What contributions to the management of professional service firms can a business school graduate provide?

25. 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.