At the end of this presentation you should have enough information to be able to learn a bit more about services and have a better idea of how services operate. These are basic concepts that form the basis for any further learning about service management.
Examples of services are given. These examples will be used in the rest of the slide pack to demonstrate specific elements of service.
The change in society from goods to services has not been matched by an equivalent change in how we consider services from a business perspective. The goods paradigm still dominates and has some gaps in relation to the management of services.
Explanation : Goods are something that customers get, services are something that happens to (or for) customers.. Examples : Detergent is a resource (one that can be used for cleaning), a cleaning service is a process are a process that . Thinking Exercise : Good usually involve a transfer of ownership, something that may not happen with services.
Explanation : The customer generally participates in a service whereas good are generally pre-produced for the customer. Examples : Very few people I have participated in the production of their mean or poultry purchases. I know of no-one who has not been present when getting their hair cut. Thinking Exercise : Dell provides goods (computer) that are put together according to the customer requests (service). iPhones are goods (things) that provides access to phone calls (service), the internet (service) and iTunes (service).
Explanation : Good are produced and persist and can be used later. Services are produced and consumed at the same time. Examples : Takeaway food is produced to be taken away and consumed later. A rock concert is produced and consumed at the same time – there is no taking away the atmosphere and music of a rock concert. Thinking Exercise : The rock convert pictured shows another difference between goods and services – services can be shared.
Explanation : Managing capacity is an important element of managing services. Airlines use yield management systems to ensure that airline seats are full at the best price. Examples : Office products can be stored for years, an unpaid for empty airline seat is a permanent lost revenue opportunity. Thinking Exercise : How does grab a seat fit into the airline model of maximising the sale of seats on a flight, what about flying stand-by.
Explanation : There is no separation between the means of product and customers with a service. If demand exceeds capacity then queues form. Understanding queues becomes an important part of managing services and is big enough to have it’s own topic. Examples : They generally don’t run out of beer at a sports game, but you may need to line up for it. Thinking Exercise : Is a service enhanced or reduced if you need to queue multiple times for different aspects of the service?
Explanation : Intangibility of services can make quality difficult to quantify without experiencing that quality. This makes services difficult to try out before using them. This is why the advent of social media is so important, recommendations are a surrogate for trial. Examples : Test driving a car is an established part of the sales process but it’s not possible to test drive a bungy jump. This is because the service is the experience. Thinking Exercise : Have you ever been asked to recommend a restaurant to a friend or asked for a recommendation?
Explanation : The mixture of intangibility and customer participation means that services vary according to the tastes of the customer. Examples : The outcome of a haircut is generally more variable than the outcome for goods. Thinking Exercise : What are the potential outcomes for employing an electrician?
Explanation : Goods are resources provided to customers who then decide how to make their value from them. The value is from the exchange of the goods. Services are processes where the customer is a co-producer and co-creator of value with the service provider. The value is obtained from the use of the service. Examples : Who has given a child a toy as a present only to have them play with the box? In this case, what is more valuable for the child, the toy or the box? At a gym, you decide what programme to follow and the instructor helps you through the process. You extract the value from participation in (use of) the class. Thinking Exercise : As a process, there is only value to be had in using a service.
Explanation : Services have a process and an outcome. Important for understanding service quality. Customers care about both and sometimes the process is more important than the outcome. Sometimes different customers care differently about the process and the outcome. Examples : Ex 1. Massage – process more important than the outcome Ex 2. Auto repair – outcome (repaired car) more important than process Thinking Exercise : A New Zealander watching Australia versus South Africa in the 2011 Rugby World Cup – which is more important, process or outcome. What about New Zealand versus France in the final?
Rows : The top row benefits more from technology and capital investment. The bottom row benefits more from the development of people. Columns : The left column benefits from more standardised operating procedures. The right column benefits from closer interaction with the customer to identify specific needs. Corners : At the top left corner contains the greatest opportunities for self service. At the bottom right corner contains the greatest opportunities for relationship management.
Services management overview
Services – An Overview 1
Learning ObjectivesTo understand basic service termsTo understand features specific to servicesTo know the difference between goods andservices 2
What are Services• Cleaning Service • Pest control• Auto repair • Sports match• Rock Concert • Restaurant• Massage • School• Air Travel • Electrician• Bungy jump• Haircut• Exercise class 3
Why Study Services?Society has changedPrevalence of services have increasedThe goods mental model is dominantServices differ significantly from goods 4
Services as Processes Goods – are a resource – something you get Services – are a process – activities that happen over time 5
Customer as Co-producer Goods – you are not involved in the production process Services – you may be involved in the production process 6
Simultaneity Goods – can be produced, then consumed later Services – are often produced and consumed at the same time 7
Perishability Goods – can be stored – for sale later Services – Cannot be stored – lost opportunities are lost forever 8
Implication of Perishability Goods – Inventory is a buffer between production and demand Services – Customers are ‘stored’ when there is too little capacity 9
Intangibility Goods – Are often tangible so can be tried before buying Services – Intangible services cannot be tried out before buying 10
Heterogeneity Goods – are focused on things and are alike Services – are focused on people and vary from customer to customer 11
Value in Use Goods – Customers use goods to make their own value Services – Customer and service provider make value jointly 12
Dimensions of ServicesServices have a process AND an outcome 13
Service Process Matrix Degree of Specialisation/Customisation Low HighDegree of Customer Contact Low Car wash Pest control High School Physician 14