the nature of services

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  • The distinction between a product and service is difficult to make, because the purchase of a product is accompanied by some facilitating service (eg: installation, support, etc.) Each purchase includes a bundle of goods and services.
  • Service factory provide a standardized service with high capital investment. The high capital investment requires managers to schedule demand to maintain the utilization of the equipment Service shops permit more service customization but they do so in a high capital environment.
  • Service factory provide a standardized service with high capital investment. The high capital investment requires managers to schedule demand to maintain the utilization of the equipment Service shops permit more service customization but they do so in a high capital environment.
  • The intangible nature of services also presents a problem for customers . When buying a produc, the customer s able to see it, feel t, and test its performance before purchase. For service they have to rely on the reputation
  • the nature of services

    1. 1. Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin The Nature of Services This presentation is a modified version of the original presentation
    2. 2. Learning Objectives <ul><li>Classify a service into one of four categories using the service process matrix . </li></ul><ul><li>Describe a service using the four dimensions of the service package. </li></ul><ul><li>Discuss the managerial implications of the distinctive characteristics of a service operation. </li></ul><ul><li>Discuss the insights obtained from a strategic classification of services. </li></ul>
    3. 3. Service/Product Bundle Airport shuttle Coffee lounge Variant In house restaurant Deferred payment plans Peripheral Service Bath robe Garment bag Peripheral Goods Room for the night Business suits Core Business hotel Custom clothier Business Core Service Example Core Goods Example Element
    4. 4. Roadmap <ul><li>The Service Process Matrix </li></ul><ul><li>Service Package </li></ul><ul><li>Distinctive Characteristics of Service Operations </li></ul><ul><li>Classification of services for strategic insight </li></ul>
    5. 5. The Service Process Matrix
    6. 6. Service Process Matrix <ul><li>Services are classified across two dimensions that significantly affect the service delivery process . </li></ul><ul><ul><li>Degree of Labor Intensity </li></ul></ul><ul><ul><ul><li>Ratio of labor cost to capital cost. </li></ul></ul></ul><ul><ul><ul><ul><li>(Labor Intensive (High) and Capital Intensive (Low)) </li></ul></ul></ul></ul><ul><ul><li>Degree of Customer Interaction and Customization </li></ul></ul>
    7. 7. The Service Process Matrix Managers of services in any category share similar challenges. There are some differences as well.
    8. 8. 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)
    9. 9. The Service Package
    10. 10. The Service Package <ul><li>Supporting Facility </li></ul><ul><li>Facilitating Goods </li></ul><ul><li>Information </li></ul><ul><li>Explicit Services </li></ul><ul><li>Implicit Services </li></ul>
    11. 11. The Service Package <ul><li>Supporting Facility: The physical resources that must be in place before a service can be sold. Examples are golf course, ski lift, hospital, airplane. </li></ul><ul><li>Facilitating Goods: The material consumed by the buyer or items provided by the consumer. Examples are food items, legal documents, golf clubs, medical history. </li></ul>
    12. 12. The Service Package <ul><li>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. </li></ul>
    13. 13. The Service Package (cont.) <ul><li>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. </li></ul><ul><li>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. </li></ul>
    14. 14. Distinctive Characteristics of Services
    15. 15. Distinctive Characteristics of Services <ul><li>Inputs </li></ul><ul><ul><li>Customers themselves </li></ul></ul><ul><li>Resources </li></ul><ul><ul><li>Facilitating goods </li></ul></ul><ul><ul><li>Employees </li></ul></ul><ul><ul><li>Capital at the command of the service manager </li></ul></ul><ul><li>Banking – focus is on processing information instead of people </li></ul><ul><ul><li>IT such as electronic funds transfer can be substituted for physically depositing a payroll check </li></ul></ul><ul><ul><li>Presence of the customer is unnecessary . </li></ul></ul>
    16. 16. Distinctive Characteristics of Services <ul><li>Customer Participation in the Service </li></ul><ul><ul><li>Attention to facility – Web Portal feel </li></ul></ul><ul><li>Process Simultaneity </li></ul><ul><ul><li>Created and consumed simultaneously. Cannot be stored </li></ul></ul><ul><li>Perishability </li></ul><ul><ul><li>Unused capacity is lost </li></ul></ul><ul><li>Intangibility </li></ul><ul><ul><li>Services are ideas and concepts. Not patentable. Perceptions </li></ul></ul><ul><li>Heterogeneity </li></ul><ul><ul><li>Variation of service from customer to customer </li></ul></ul>
    17. 17. Distinctive Characteristics of Services <ul><li>Customer Participation in the Service Process : attention to facility design but opportunities for co-production </li></ul><ul><li>Simultaneity : opportunities for personal selling, interaction creates customer perceptions of quality </li></ul><ul><li>Perishability : cannot inventory, opportunity loss of idle capacity, need to match supply with demand </li></ul><ul><li>Intangibility : creative advertising, no patent protection, importance of reputation </li></ul><ul><li>Heterogeneity : customer participation in delivery process results in variability </li></ul>
    18. 18. Strategic Service Classification
    19. 19. Strategic Service Classification (Nature of the Service Act)
    20. 20. Strategic Service Classification (Relationship with Customers)
    21. 21. Strategic Service Classification (Customization and Judgment)
    22. 22. Strategic Service Classification (Nature of Demand and Supply)
    23. 23. Strategic Service Classification (Method of Service Delivery)
    24. 24. Summary <ul><li>The Service Process Matrix </li></ul><ul><li>Service Package </li></ul><ul><li>Distinctive Characteristics of Service Operations </li></ul><ul><li>Classification of services for strategic insight </li></ul>Questions / Comments ???
    25. 25. Village Volvo’s Service Package <ul><li>Supporting Facility </li></ul><ul><li>Facilitating Goods </li></ul><ul><li>Information </li></ul><ul><li>Explicit Services </li></ul><ul><li>Implicit Services </li></ul>
    26. 26. Village Volvo’s Distinctive Service Characteristics <ul><li>Intangibility </li></ul><ul><li>Perishability </li></ul><ul><li>Heterogeneity </li></ul><ul><li>Simultaneity </li></ul><ul><li>Customer Participation in the Service Process </li></ul>
    27. 27. Village Volvo’s Service Classification <ul><li>Nature of the service act </li></ul><ul><li>Relationship with customers </li></ul><ul><li>Customization and judgement </li></ul><ul><li>Nature of demand and supply </li></ul><ul><li>Method of service delivery </li></ul>
    28. 28. Managing Village Volvo <ul><li>How could Village Volvo manage its back office (repair operations) like a factory? </li></ul><ul><li>How can Village Volvo differentiate itself from Volvo dealers? </li></ul>

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