The Nature of Services
Learning Objectives
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Understanding the managerial implications of
the distinctive characteristics of a service
operation.
Describing a service using the four
dimensions of the service package.
Insights gained from strategic classifications
of services.
Challenges for management of service
enterprises.
Proportion of Goods and Services
in Purchase Bundle
Goods
Services
100%
75
50
25
0
25
50
75
100%
Self-service gasoline…………….
Personal computer……………
Office copier………………….
Fast-food restaurant…………
Gourmet restaurant…………
Auto repair……………………
Airline flight…………………….
Haircut………………………….
Service/Product Bundle
Element
Business
Core Goods
Example
Custom clothier
Core Service
Example
Business hotel
Core
Business suits
Room for the
night
Peripheral
Goods
Garment bag
Bath robe
Peripheral
Service
Deferred
payment plans
In house
restaurant
Variant
Coffee lounge
Airport shuttle
The Service Process Matrix
Degree
Degree of Interaction and Customization
of labor Intensity
Low
High
Low
High
Service factory:
* Airlines
* Trucking
* Hotels
* Resorts and recreation
Service shop:
* Hospitals
* Auto repair
* Other repair services
Mass service:
* Retailing
* Wholesaling
* Schools
* Retail aspects of
commercial banking
Professional service:
* Doctors
* Lawyers
* Accountants
* Architects
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
purchased or consumed by the buyer or
items provided by the consumer.
Examples are food items, auto parts,
legal documents, golf clubs.
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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.
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The Servuction Service Model
Invisible
Organization
And System
Invisible
Inanimate
Environment
Customer
A
Customer
B
Contact
Personnel
or Service
Provider
Visible
Bundle of Service
Benefits Received
By Customer A
Unique Characteristics of Services
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Intangibility: creative advertising, no patient
protection, importance of reputation
Perishability: cannot inventory, opportunity loss of
idle capacity, need to match supply with demand
Heterogeneity: customer participation in delivery
process results in variability
Simultaneity: opportunities for personal selling,
interaction creates customer perceptions of quality
Site Location: dictated by your customers
Customer Participation in the Service Process:
attention to facility design but opportunities for coproduction
Difficulty in measuring quality of output:
Strategic Service Classification
(Nature of the Service Act)
Direct Recipient of the Service
Nature of
the Service Act
Tangible actions
People
People’s bodies:
Health care
Passenger transportation
Freight transportation
Equipment repair and maintenance
Beauty salons
Exercise clinics
Restaurants
Haircutting
Veterinary care
Janitorial services
Laundry and dry cleaning
Landscaping/lawn care
People’s minds:
Intangible actions
Things
Physical possessions:
Intangible assets:
Education
Banking
Broadcasting
Information services
Theaters
Museums
Legal services
Accounting
Securities
Insurance
Strategic Service Classification
(Relationship with Customers)
Type of Relationship between Service Organization and Its Customers
Nature of
Service Delivery
“Membership” relationship
No formal relationship
Continuous delivery
of service
Discrete transactions
Insurance
Telephone subscription
Radio station
Police protection
College enrollment
Lighthouse
Banking
American Automobile association
Public Highway
Long-distance phone calls
Theater series subscription
Restaurant
Mail service
Commuter ticket or transit pass
Sam’s Wholesale Club
Egghead computer software
Toll highway
Movie theater
Public transportation
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
Professional services
Surgery
Taxi services
High
Low
Education (large classes)
Preventive health programs
College food service
Beautician
Plumber
Gourmet restaurant
Telephone service
Hotel services
Public transportation
Routine appliance repair
Retail banking (excl. major loans)
Family restaurant
Movie theater
Spectator sports
Fast-food restaurant
Strategic Service Classification
(Nature of Demand and Supply)
Extent of Demand Fluctuation over Time
Extent to which Supply
Is Constrained
Peak demand can
usually be met
without a major delay
Peak demand regularly
exceeds capacity
Wide
Narrow
Electricity
Insurance
Natural gas
Legal services
Telephone
Banking
Hospital maternity unit
Police and fire emergencies
Laundry and dry cleaning
Accounting and tax preparation
Services similar to those above
Passenger transportation
but with insufficient capacity
Hotels and motels
Restaurants
for their base level of
business
Strategic Service Classification
(Method of Service Delivery)
Availability of Service Outlets
Nature of Interaction
between Customer and
Service Organization
Single site
Multiple site
Customer goes to
service organization
Theater
Bus service
Barbershop
Fast-food chain
Service organization
comes to customer
Lawn care service
Mail delivery
Pest control service
Taxi
AAA emergency repairs
Credit card company
Broadcast network
Customer and service
organization transact at
arm’s length (mail or
electronic communications)
Local TV station
Telephone company
Open Systems View of Service
Operations
Service Process
Consumer arrivals
(input)
Consumer participant
Consumer-Provider
interface
Control
Customer demand
Perceived needs
Location
Consumer
Evaluation
departures
( output)
Criteria
Measurement
Monitor
Service operations manager
Production function:
Alter
Monitor and control process
Schedule
demand Marketing function:
supply
Interact with consumers
Control demand
Modify as necessary
Define standard
Communicate
by advertising
Service package
Supporting facility
Facilitating goods
Explicit services
Implicit services
Basis of
selection
Service personnel
Empowerment
Training
Attitudes
Topics for Discussion
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What are the characteristics of services that will be
most appropriate for Internet delivery? Which are
not?
Illustrate the “distinctive characteristics of service
operations” for a service you are familiar with.
What are some management problems associated
with allowing service employees to exercise
judgement in meeting customer needs?
Comment on why hospitals, given they are so laborintensive, are classified as a service shop?
What factors are important for a manager to consider
when attempting to enhance a service firm’s image?