Chapter 1An Introduction to Services
WHAT IS A SERVICE?The Distinction is Unclear:       The Scale of Market Entities                    &          The Molecul...
WHAT IS A SERVICE?In General: Goods  Objects, Devices, Things Services   Deeds, Efforts, Performances
THE BENEFIT CONCEPT Encapsulation of benefits in the  consumers mind   Tide     Cleanliness     Whiteness     Motherh...
THE BENEFIT CONCEPT Services deliver the bundle of  benefits through the experience  that is created for the consumer Th...
The Servuction Model                Inanimate                Customer A               EnvironmentInvisibleorganization    ...
THE INCREASING DEMAND      FOR SERVICE KNOWLEDGE Changes in management perspective   The Industrial Model vs. The Market...
THE DEMAND FOR KNOWLDEGE:      SERVICE SECTOR EMPLOYMENT Service Sector               New Job Creation:  Employment:    ...
THE DEMAND FOR KNOWLEDGE:  CONTRIBUTIONS TO THE ECONOMY Economic impact: The service sector accounts for over  70% of th...
THE DEMAND FOR KNOWLEDGE:    THE IMPACT OF DEREGULATION   Effect of Deregulations: No demand for services knowledge  when...
THE DEMAND FOR KNOWLEDGE:      THE IMPACT OF DEREGULATIONEffect of Deregulations (continued):Knowledge is needed in nonpri...
THE INDUSTRIAL MODEL Sales Revenues are a function of:   location Strategies   sales Promotions   advertising
THE INDUSTRIAL MODEL            (continued) Labor and operating costs should  be kept as low as possible   better to rel...
THE INDUSTRIAL MODEL             (continued) Places a higher value on upper and  middle managers Replaces full-time pers...
CONSEQUENCES OF          THE INDUSTRIAL MODEL                (employee) Guarantees a cycle-of-failure Encourages front-l...
CONSEQUENCES OF           THE INDUSTRIAL MODEL                 (employee)     poor pay has created a new class of      mi...
CONSEQUENCES          OF THE INDUSTRIAL MODEL                 (customers) Customer dissatisfaction   2/3 of customer’s d...
THE MARKET-FOCUSED         MANAGEMENT MODEL Purpose of the firm is to serve the  customer Service delivery is the focus ...
THE SERVICES TRIANGLE                     The•The company       service   •The organizationexists to serve   strategy   ex...
THE SERVICES TRIANGLE1. Communicate the service strategy to the   customer2. Customer/employee interaction:   greatest op...
THE SERVICES TRIANGLE4. Organizational systems may  prevent   employees from giving good service5. Physical and administra...
CHARACTERISTICS OF THE   MARKET-FOCUSED MODEL Believes employees want to do good  work   invests in people as much as ma...
CHARACTERISTICS OF THE          MARKET-FOCUSED MODEL                (continued) Recognizes that employee turnover  and cu...
CHARACTERISTICS OF THE         MARKET-FOCUSED MODEL               (continued) Employ more full-time employees   better f...
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  1. 1. Chapter 1An Introduction to Services
  2. 2. WHAT IS A SERVICE?The Distinction is Unclear: The Scale of Market Entities & The Molecular Model
  3. 3. WHAT IS A SERVICE?In General: Goods  Objects, Devices, Things Services  Deeds, Efforts, Performances
  4. 4. THE BENEFIT CONCEPT Encapsulation of benefits in the consumers mind  Tide  Cleanliness  Whiteness  Motherhood
  5. 5. THE BENEFIT CONCEPT Services deliver the bundle of benefits through the experience that is created for the consumer The servuction model provides a framework for understanding the consumer’s experience
  6. 6. The Servuction Model Inanimate Customer A EnvironmentInvisibleorganization Contactand systems Personnel Or Service Customer B Provider Invisible Visible Bundle of service benefits received by Customer A
  7. 7. THE INCREASING DEMAND FOR SERVICE KNOWLEDGE Changes in management perspective  The Industrial Model vs. The Market- focused Model Growth in service sector employment Service sector contributions to the world economy Deregulation
  8. 8. THE DEMAND FOR KNOWLDEGE: SERVICE SECTOR EMPLOYMENT Service Sector  New Job Creation: Employment:  80% of All New  78% in United Jobs (1980-1990) States  90% of All New  73% in Great Jobs (1990-2000) Britain  88% of All Jobs by  62% in Japan 2005  57% in Germany  90% of All Jobs by 2020*42% of Work Force is Providing Some Form of Personal Service
  9. 9. THE DEMAND FOR KNOWLEDGE: CONTRIBUTIONS TO THE ECONOMY Economic impact: The service sector accounts for over 70% of the United States’ gross domestic product (GDP) The majority of industries in the U.S. economy do not produce, they perform
  10. 10. THE DEMAND FOR KNOWLEDGE: THE IMPACT OF DEREGULATION Effect of Deregulations: No demand for services knowledge when demand exceeded supply and competitive pressures were few  Between 1980-1992  U.S. airlines declined from 36 to 12  the number of trucking companies that failed during the 1980s was more than the previous 45 years combined  commercial banks declined by 14%
  11. 11. THE DEMAND FOR KNOWLEDGE: THE IMPACT OF DEREGULATIONEffect of Deregulations (continued):Knowledge is needed in nonprice issues:  customer service  customer retention  image enhancement  transforming public contact personnel into marketing-oriented personnel
  12. 12. THE INDUSTRIAL MODEL Sales Revenues are a function of:  location Strategies  sales Promotions  advertising
  13. 13. THE INDUSTRIAL MODEL (continued) Labor and operating costs should be kept as low as possible  better to rely on machines than humans  narrowly defined jobs  Leave little room for discretion  believes most employees are indifferent, unskilled, and incapable of completing complex tasks.  performance expectations are low  wages are kept low  few opportunities for advancement
  14. 14. THE INDUSTRIAL MODEL (continued) Places a higher value on upper and middle managers Replaces full-time personnel with part-time personnel to reduce costs
  15. 15. CONSEQUENCES OF THE INDUSTRIAL MODEL (employee) Guarantees a cycle-of-failure Encourages front-line personnel to be indifferent to problems  no opportunity for advancement (dead- end jobs)  poor pay  some companies let employees go before mandatory raises
  16. 16. CONSEQUENCES OF THE INDUSTRIAL MODEL (employee)  poor pay has created a new class of migrant worker  16 million people now travel from one short-term job to another  superficial training  focuses only on product knowledge  little, if any, company benefits Prohibits employees from taking discretionary action High employee turnover rate
  17. 17. CONSEQUENCES OF THE INDUSTRIAL MODEL (customers) Customer dissatisfaction  2/3 of customer’s defect, not due to the product, but due to the unhelpfulness of the provider  flat and declining sales revenues Overall the industrial approach is bad for:  employees  customers  shareholders  country
  18. 18. THE MARKET-FOCUSED MANAGEMENT MODEL Purpose of the firm is to serve the customer Service delivery is the focus of the system and the overall differential advantage in terms of competitive advantage The services triangle provides a framework for the services model
  19. 19. THE SERVICES TRIANGLE The•The company service •The organizationexists to serve strategy exists to serve thethe customer needs of the people who serve the customer The customer The The systems people
  20. 20. THE SERVICES TRIANGLE1. Communicate the service strategy to the customer2. Customer/employee interaction:  greatest opportunity for gains and losses  moments-of-truth  critical incidents3. Customer/procedures & physical hardware  A.T.M. machines  cramped airline seats
  21. 21. THE SERVICES TRIANGLE4. Organizational systems may prevent employees from giving good service5. Physical and administrative systems should flow logically from the service strategy6. Good service starts at the top *MGT. should “Walk What They Talk” and provide: -sense of focus -clarity -priorities
  22. 22. CHARACTERISTICS OF THE MARKET-FOCUSED MODEL Believes employees want to do good work  invests in people as much as machines  technology is used to assist people (not to monitor there every activity)  data is made available to the front-line
  23. 23. CHARACTERISTICS OF THE MARKET-FOCUSED MODEL (continued) Recognizes that employee turnover and customer satisfaction are closely related  tie pay to performance  focus on selection and training of personnel  Ryder Truck  no training (41% turnover)  received training (19% turnover)  better trained, provide better service, require less supervision
  24. 24. CHARACTERISTICS OF THE MARKET-FOCUSED MODEL (continued) Employ more full-time employees  better for customers and employees  companies that pay more are finding that as a percentage of sales, labor costs are actually lower than industry averages
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