1. Service Management Ch. 2, The Nature of Services

2. 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

3. 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

4. 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

5. 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

6. 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.

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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?

15. 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)