The Nature of Services
Learning Objectives
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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.
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
Service/Product Bundle
Element
Business
Core Goods
Example
Custom clothier
Core Service
Example
Business hotel
Core
Business suits
Peripheral
Goods
Garment bag
Room for the
night
Bath robe
Peripheral
Service
Variant
Deferred
payment plans
In house
restaurant
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
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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.
The Service Package (cont.)
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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.
Distinctive Characteristics of Services
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Customer Participation in the Service Process:
attention to facility design but opportunities for coproduction
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
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
Beauty salons
Exercise clinics
Restaurants
People’s minds:
Intangible actions
Education
Broadcasting
Information services
Theaters
Museums
Things
Physical possessions:
Freight transportation
Repair and maintenance
Veterinary care
Janitorial services
Laundry and dry cleaning
Intangible assets:
Banking
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
Electric Utility
Radio station
Police protection
Lighthouse
Banking
Public Highway
Long-distance phone calls
Theater series tickets
Transit pass
Sam’s Wholesale Club
Airline frequent flyer
Restaurant
Pay phone
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
High
Low
Surgery
Preventive health programs
Taxi services
Gourmet restaurant
Education (large classes)
Family restaurant
Telephone service
Hotel services
Public transportation
Spectator sports
Retail banking
Cafeteria
Movie theater
Institutional food service
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
Telephone
Legal services
Police emergency
Banking
Hospital maternity unit
Laundry and dry cleaning
Tax preparation
Fast food restaurant
Passenger transportation
Movie theater
Hotels and motels
Gas station
Strategic Service Classification
(Method of Service Delivery)
Availability of Service Outlets
Nature of Interaction
between Customer and
Service Organization
Customer travels to
service organization
Service provider
travels to customer
Transaction is at
arm’s length
Single site
Multiple site
Theater
Bus service
Barbershop
Fast-food chain
Taxi
Mail delivery
Pest control service
Taxi
AAA emergency repairs
Credit card company
Broadcast network
Local TV station
Telephone company
Open Systems View of Services
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
Village Volvo’s Service Package
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Supporting Facility
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Facilitating Goods
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Information
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Explicit Services
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Implicit Services
Village Volvo’s Distinctive
Service Characteristics
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Intangibility
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Perishability
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Heterogeneity
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Simultaneity
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Customer Participation in the Service Process
Village Volvo’s Service
Classification
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Nature of the service act
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Relationship with customers
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Customization and judgement
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Nature of demand and supply
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Method of service delivery
Managing Village Volvo
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How could Village Volvo manage its
back office (repair operations) like a
factory?
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How can Village Volvo differentiate itself
from Volvo dealers?
Xpresso Lube Facility
Xpresso Lube’s Service Package
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Supporting Facility
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Facilitating Goods
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Information
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Explicit Services
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Implicit Services
Xpresso Lube’s Distinctive
Service Characteristics
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Intangibility
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Perishability
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Heterogeneity
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Simultaneity
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Customer Participation in the Service Process
Xpresso Lube’s Service
Classification
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Nature of the service act
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Relationship with customers
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Customization and judgement
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Nature of demand and supply
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Method of service delivery
Beyond Xpresso Lube
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What elements of Xpresso Lube’s
location contribute to its success?
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Given the example of Xpresso Lube,
what other services could be combined
to “add value” for the customer?
Topics for Discussion
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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?
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.