2 Service Management (5e) Operations, Strategy, Information Technology

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 open-systems 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 Tax preparation Fast food restaurant Passenger transportation Movie theater Hotels and motels Gas station

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?