SERVICE MANAGEMENT

Nature of Services
Today’s Lecture..

 Service
 The Service Process Matrix
 Service Package
 Distinctive Characteristics of Service
Operations
 Classification of services for strategic insight
 Examples of Service Industries
 Health Care
 hospital, medical practice, dentistry, eye care
 Professional Services
 accounting, legal, architectural
 Financial Services
 banking, investment advising, insurance
 Hospitality
 restaurant, hotel/motel, bed & breakfast
 ski resort, rafting
 Travel
 airline, travel agency, theme park
 Others
 hair styling, pest control, plumbing, lawn maintenance,
counseling services, health club, interior design
Contributions of Service Industries to
U.S. Gross Domestic Product
What is Service?
 A Service is a type of a product.

“… a deed performed by one party for another…”

 Discussions about the marketing of goods apply to
services as well.
 Services have special characteristics that make
them different than products.
 What is Service?
• A product without physical characteristics;
a bundle of performance and symbolic attributes
designed to produce consumer want satisfaction.
• “ all economic activities whose output is not a
physical product or construction, is generally
consumed at the time it is produced, and
provides added value in forms ( such as
convenience, timeliness, comfort or health) that
are essentially intangible concerns of its first
purchaser.”
 Tangible / Intangible Attributes

 Tangible  Intangible
 touch  can’t see
 see  can’t touch
 taste  can’t smell
 smell  can’t taste
Goods and Services: Scale of
Elemental Dominance
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
The Service Process Matrix

Degree of labor Degree of Interaction and Customization

Intensity
Low High
Service factory: Service shop:

Low * Airlines * Hospitals

* Hotels * Auto repair

Mass service: Professional service:

High * Retailing * Doctors
* Schools * Architects

Managers of services in any category share similar challenges.

There are some differences as well.
Service Package
 Service Package

 Supporting Facility
 Facilitating Goods
 Information
 Explicit Services
 Implicit Services
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.
The Service Package

Facilitating Goods: The material consumed by the

buyer or items provided by the consumer. Examples
are food items, legal documents, golf clubs, medical
history.
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.
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.
The Service Package (cont.)
 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.
Goods versus Services
Distinctive Characteristics of Services

 Intangibility
 Services are ideas and concepts. Not patentable. Perceptions

 Process Simultaneity
 Created and consumed simultaneously. Cannot be stored

 Heterogeneity
 Variation of service from customer to customer

 Perishability
 Unused capacity is lost
 Customer Participation in the Service
 Attention to facility – Web Portal feel
 Distinctive Characteristics of Services

1. Intangibility - “u can’t touch this”

• Services cannot be stored
• Services cannot be protected through patents
- therefore a really great travel package and service can be
copied
- a really great physical object can be patented, and NOT
allowed to be copied
• Hard to explain and display Services if you can’t see them
• Prices are difficult to set - depends on customers expectations
 Distinctive Characteristics of Services

1. Intangibility - “u can’t touch this”

Marketing Strategies
• stress tangible cues, e.g.. Smiling face
• use personal information, sources, references
• use word-of-mouth
• contact customers after they buy to stimulate
continued enthusiasm and hope they “talk it up”
 Distinctive Characteristics of Services

2. Inseparability of Production (or

performing the service) and Consumption
(using the service) - happens at the same time

• Many people involved in delivering a service

• mass production of services is hard to do
 Distinctive Characteristics of Services
2. Inseparability of Production (or performing the
service) and Consumption (using the service) -
happens at the same time
Marketing Strategies
• Emphasize how much you train your people - so their ability to
give you good service will be high
• Have many locations, so customers can get to you
• i.e.. Insurance sales personnel come to your home
 Distinctive Characteristics of Services
3. Heterogeneity - services are not always delivered the
same way
It is very difficult to standardize services
e.g.. A machine can make ice cream cones a standard size
100% of the time
A person filling an ice cream cone with a scoop cannot do it
the same amount each time, unless you use a machine to
dispense the ice cream
 Distinctive Characteristics of Services

3. Heterogeneity - services are not always

delivered the same way
It is very difficult to standardize services
e.g.. A Taxi driver cannot drive you to the office in
exactly the same time each day because the traffic
patterns change
e.g.. A travel agent can sell you a vacation
package - but cannot guarantee you will like the
trip exactly the same way another tourist did.
Distinctive Characteristics of Services
4. Perishability - cannot be put in inventory or
stored for later use
i.e.. You can’t buy 2 haircuts

Demand fluctuates and changes, sometimes

depending on the season, or weather
e.g.. Taxi in the rain, vacation in summer
 Strategic Service Classification
(Nature of the Service Act)
Direct Recipient of the Service
Nature of
the Service Act People possessions
People’s bodies: Physical possessions:

Health care Freight transportation

Passenger transportation Repair and maintenance
Tangible actions Beauty salons Veterinary care
Exercise clinics Landscaping / gardening
Restaurants Laundry and dry cleaning
People’s minds: Intangible assets:

Education Banking
Intangible actions Broadcasting Legal services
Information services Accounting
Theaters Securities
Museums 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

Insurance Radio station

Continuous Telephone subscription Police protection
delivery Electric Utility Lighthouse
of service Banking Public Highway

Restaurant
Long-distance phone calls
Pay phone
Discrete Theater series tickets
Toll highway
transactions Transit pass
Movie theater
Airline frequent flyer
Public transportation
 Strategic Service Classification
(Customization and Judgment)

Extent to Which Service Characteristics Are Customized

Extent to Which
Personnel Exercise
Judgment in Meeting High Low
Customer Needs
Preventive health
Surgery
High programs
Taxi services
Education (large classes)
Gourmet restaurant
Family restaurant
Telephone service Public transportation
Hotel services Spectator sports
Low Retail banking Movie theater
Cafeteria Institutional food service
Strategic Service Classification
(Nature of Demand and Supply)

Extent of Demand Fluctuation over Time

Extent to which Supply
Is Constrained Wide Narrow
Electricity Insurance
Peak demand can
Telephone Legal services
usually be met without
Police emergency Banking
a major delay
Hospital maternity Laundry and dry
unit cleaning
Tax preparation
Fast food restaurant
Peak demand regularly Passenger
Movie theater
exceeds capacity transportation
Gas station
Hotels and motels
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 Theater Bus service
service organization Barbershop Fast-food chain
Taxi
Service provider Mail delivery
Pest control service
travels to customer Emergency repairs

Transaction is at Credit card company Broadcast network

arm’s length Local TV station Telephone company
Interactive Class Exercise

The class will break into 5 groups and each group

will be 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.
Term Project Details (20 marks)
 A Foreign Institutional Investor (FII) Wants to invest funds
in India in the following sectors. How would you market
these sectors to the FII for maximum fund investment?
1. Health Care
2. Education
3. Tourism
4. Infrastructure Development
5. Entertainment
6. Banking and Insurance
7. Retail trade
8. Communication
Presentation Details

Presentation should cover the following:

1. Background of the sector (general details)
2. Development in the sector (past)
3. Economic policies relating to the sector
4. Scope of development (Future)
5. Industry suggested for investment and the
reason for the same
6. Competition in the selected industry
7. Suggested Marketing Strategy
Thank You