Module 1 Lect Ure 5 The Nature Of Services

The Nature of Services

This presentation is a modified version of the original presentation McGraw-Hill/Irwin

Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved.

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.

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Discuss the managerial implications of the distinctive characteristics of a service operation.



Discuss the insights obtained from a strategic classification of services. 2

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 In house restaurant plans

Variant

Coffee lounge

Airport shuttle

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Roadmap

  



The Service Process Matrix Service Package Distinctive Characteristics of Service Operations Classification of services for strategic insight

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The Service Process Matrix

Service Process Matrix  Services

are classified across two dimensions that significantly affect the service delivery process. 

Degree of Labor Intensity 

Ratio of labor cost to capital cost.

(Labor Intensive (High) and Capital Intensive (Low)) 

Degree of Customer Interaction and Customization

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The Service Process Matrix

Degree of la Intensity Managers of services in any category share similar challenges. There are some differences as well.

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The Service Process Matrix What are some of the issues of concern for each category identified in the Service Process Matrix? (Please take a moment and think about this)

The Service Package

The Service Package 

Supporting Facility



Facilitating Goods



Information



Explicit Services



Implicit Services

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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. 11

The Service Package 

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.

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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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Distinctive Characteristics of Services

Distinctive Characteristics of Services 

Inputs 



Customers themselves

Resources 

Facilitating goods



Employees



Capital at the command of the service manager

Banking – focus is on processing information instead of people • IT such as electronic funds transfer can be substituted for physically depositing a payroll check • Presence of the customer is unnecessary.

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

Customer Participation in the Service 



Process Simultaneity 



Unused capacity is lost

Distinctive Characteristics of Services

Intangibility 



Created and consumed simultaneously. Cannot be stored

Perishability 



Attention to facility – Web Portal feel

Services are ideas and concepts. Not patentable. Perceptions

Heterogeneity 

Variation of service from customer to customer

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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

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Intangibility: creative advertising, no patent protection, importance of reputation



Heterogeneity: customer participation in delivery process results in variability

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Strategic Service Classification

Strategic Service Classification (Nature of the Service Act)

Nature of the Service A 19

Strategic Service Classification (Relationship with Customers)

Type of

Nature of

20

Strategic Service Classification (Customization and Judgment)

E xten t to W 21

Strategic Service Classification (Nature of Demand and Supply)

Extent to w 22

Strategic Service Classification (Method of Service Delivery)

N ature of 23

Summary    

The Service Process Matrix Service Package Distinctive Characteristics of Service Operations Classification of services for strategic insight

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Village Volvo’s Service Package  Supporting

Facility

 Facilitating

Goods

 Information  Explicit

Services

 Implicit

Services 25

Village Volvo’s Distinctive Service Characteristics  Intangibility  Perishability  Heterogeneity  Simultaneity  Customer

Participation in the Service Process 26

Village Volvo’s Service Classification  Nature

of the service act

 Relationship

with customers

 Customization  Nature

and judgement

of demand and supply

 Method

of service delivery 27

Managing Village Volvo  How

could Village Volvo manage its back office (repair operations) like a factory?

 How

can Village Volvo differentiate itself from Volvo dealers?

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