2
Service Management (5e)
Operations, Strategy, Information Technology
By
Fitzsimmons and Fitzsimmons
Chapter – 2
The Nature of Services
2-2
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 opensystems view of service.
2-3
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
2-4
Service/Product Bundle
Element
Core Goods
Example
Core Service
Example
Business
Custom clothier
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
2-5
The Service Process Matrix
Degree of labor
Intensity
Low
High
Degree of Interaction and Customization
Low
Service factory:
* Airlines
* Trucking
* Hotels
* Resorts and recreation
Mass service:
* Retailing
* Wholesaling
* Schools
* Retail aspects of
commercial banking
High
Service shop:
* Hospitals
* Auto repair
* Other repair services
Professional service:
* Doctors
* Lawyers
* Accountants
* Architects
2-6
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.
2-7
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.
2-8
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
2-9
Strategic Service Classification (Nature
of the Service Act)
Direct Recipient of the Service
Nature of
the Service Act
Tangible actions
Intangible actions
People
People’s bodies:
Things
Physical possessions:
Health care
Passenger transportation
Beauty salons
Exercise clinics
Restaurants
People’s minds:
Freight transportation
Repair and maintenance
Veterinary care
Janitorial services
Laundry and dry cleaning
Intangible assets:
Education
Broadcasting
Information services
Theaters
Museums
Banking
Legal services
Accounting
Securities
Insurance
2-10
Strategic Service Classification
(Relationship with Customers)
Type of Relationship between Service Organization and Its Customers
Nature of Service
Delivery
Continuous delivery
of service
Discrete
transactions
“Membership” relationship
No formal relationship
Insurance
Telephone subscription
Electric Utility
Banking
Radio station
Police protection
Lighthouse
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
2-11
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
High Taxi services
Gourmet restaurant
Preventive health programs
Education (large classes)
Family restaurant
Telephone service
Hotel services
Low Retail banking
Cafeteria
Public transportation
Spectator sports
Movie theater
Institutional food service
2-12
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
Electricity
Telephone
Police emergency
Hospital maternity unit
Narrow
Insurance
Legal services
Banking
Laundry and dry
cleaning
Fast food restaurant
Tax preparation
Passenger transportation Movie theater
Gas station
Hotels and motels
2-13
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
service organization
Theater
Barbershop
Bus service
Fast-food chain
Service provider
travels to customer
Taxi
Pest control service
Taxi
Mail delivery
AAA emergency repairs
Transaction is at
arm’s length
Credit card company
Local TV station
Broadcast network
Telephone company
2-14
Open Systems View of Services
2-15
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?