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3 The Nature Of Services


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3 The Nature Of Services

  1. 1. “ Managers do not control the quality of the product when the product is a service . . . . The quality of the service is in a precarious state – it is in the hands of the service workers who ‘produce’ and deliver it.” -Karl Albrecht
  2. 2. The Nature of Services Customer Care Week Three
  3. 3. Objectives <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>
  4. 4. Learning Criteria <ul><li>Explain the central role of the customer in a business and services environment </li></ul><ul><li>Undertake research to investigate customer requirements and satisfaction levels </li></ul>
  5. 5. <ul><li>Views of service practitioners: </li></ul><ul><li>“ You cannot market a bank account by applying same rules that are used for the marketing of a can of Campbell’s soup” </li></ul><ul><li>This logic resembles the statement that apples are just like oranges except for their ‘appleness’” </li></ul><ul><ul><ul><ul><ul><li>(Shostack, 1977) </li></ul></ul></ul></ul></ul>
  6. 6. Unified Services Theory <ul><li>“ With service processes, the customer provides significant inputs to the production process. With manufacturing processes, groups of customers may contribute ideas to the design of the product, but individual customers’ only participation is to select and consume the output. All managerial themes unique to services are founded in this distinction” </li></ul><ul><ul><li>Sampson(2001) </li></ul></ul>
  7. 7. Unified Service Theory Themes <ul><li>Service processes are distinguished from non-service processes only by the presence of customer inputs and implications thereof. </li></ul><ul><li>For those familiar with business management in general, understanding those additional issues unique to managing services requires only understanding the implications of customer inputs. </li></ul>
  8. 8. Unified Service Theory Themes <ul><li>Customer inputs are the root cause of the unique issues and challenges of services management. </li></ul><ul><ul><ul><ul><ul><li>Sampson and Froehle (2006) </li></ul></ul></ul></ul></ul>
  9. 9. The Special Characteristics of Services <ul><ul><li>Intangibility </li></ul></ul><ul><ul><li>Inseparability of production and consumption </li></ul></ul><ul><ul><li>Variability (variety/choice) </li></ul></ul><ul><ul><li>Perishability </li></ul></ul>
  10. 10. Characteristics of Service Marketing
  11. 11. The Intangibility of Services (I) <ul><li>It refers to the total lack or perception of a service’s characteristics before and (often) after it is performed </li></ul><ul><ul><li>The term was first used in 1963 (Regan) </li></ul></ul><ul><ul><li>It is the most radical characteristic of services, where from which the others emanate </li></ul></ul>
  12. 13. The Intangibility of Services (I) <ul><li>Service Characteristics </li></ul><ul><li>Requires great marketing skills in ‘tangibilising’ intangible offerings, i.e., in surrounding them with “hard” peripheral attributes </li></ul><ul><li>Technical superiority and long term vision in new service development, in order to protect a service from its non-patentability </li></ul><ul><li>Special pricing know-how, i.e., what is the cost of a service? </li></ul><ul><li>Creative communications skills, i.e., what message to communicate? </li></ul>
  13. 14. The Intangibility of Services (II) <ul><li>Criticism to the distinguishing power of intangibility </li></ul><ul><ul><li>Increasing knowledge and Repeated use of a service nullifies intangibility </li></ul></ul><ul><ul><li>The inability of customers to physically evaluate services is also the case in some goods </li></ul></ul><ul><ul><li>Many goods have intangible elements too </li></ul></ul>
  14. 15. The Intangibility of Services (II) <ul><li>Picture of beach </li></ul><ul><li>Perceptions </li></ul>
  15. 17. The Inseparability of Services (I) <ul><li>The Simultaneous production and consumption of services </li></ul><ul><li>The production process of services has been called “servuction” process (Eiglier and Langeard, 1977) </li></ul><ul><li>The customer is present when the service is produced </li></ul><ul><li>The customer plays a role in the servuction and the delivery process </li></ul><ul><li>Customers interact with one another during the servuction process and may be affected (positively or negatively) by this interaction </li></ul>
  16. 19. The Inseparability of Services (II) <ul><li>Implications </li></ul><ul><li>Mass production of services is difficult (if possible at all ) </li></ul><ul><li>No significant economies can be earned from centralization of operations, since the service must be produced at the convenience of customers (temporal and physical) </li></ul><ul><li>Service quality depends highly on what happens in real time, i.e., during the service encounter </li></ul><ul><li>Since customers have a vital role in the servuction and delivery process, the service provider needs great skills to train them how to play their role </li></ul><ul><li>The service provider must prove excellence each time the service is produced </li></ul><ul><li>The service provider needs skills in order to tackle disruptions </li></ul>
  17. 20. The Heterogeneity of Services (I) <ul><li>It refers to the potential for high variability in the performance and the quality of services, caused by the interaction between the service employee and the customer </li></ul><ul><li>The performance of the employees delivering one same service varies: </li></ul><ul><ul><li>Between different hour zones of the day </li></ul></ul><ul><ul><li>From employee to employee </li></ul></ul><ul><ul><li>From service company to service company </li></ul></ul>
  18. 22. The Heterogeneity of Services (I) <ul><li>Not all customers play their role at the service encounter in a </li></ul><ul><li>homogenous and predictable way </li></ul><ul><li>Heterogeneity is particularly the case with labour intensive and high-contact services </li></ul><ul><li>Heterogeneity is less visible in technology-based services </li></ul>
  19. 23. The Heterogeneity of Services (II) <ul><li>Marketing implications </li></ul><ul><li>Need to develop service blueprints (Shostack, 1977), i.e., a production line approach to the servuction process </li></ul><ul><li>Requirement to find a balance between standardisation and personalisation during service delivery </li></ul><ul><li>Ability for real time detection of which side of the encounter causes service failure </li></ul>
  20. 24. The Heterogeneity of Services (II) <ul><li>Implications </li></ul><ul><li>Need for a mechanism of timely service recovery </li></ul><ul><li>Skillful selection and motivation of appropriate front-line employees </li></ul><ul><li>Criticism to the adequacy of heterogeneity as a line of demarcation between goods and services </li></ul><ul><li>Not all services are heterogeneous, not all goods are homogeneous </li></ul>
  21. 25. The Perishability of Services <ul><li>It refers to the fact that services cannot be saved, stored, resold or returned </li></ul><ul><ul><li>Difficulties in synchronising supply and demand for services </li></ul></ul>
  22. 27. The Perishability of Services <ul><li>Implications </li></ul><ul><ul><li>Need for developing an as accurate as possible demand forecasting mechanism </li></ul></ul><ul><ul><li>Need for a creative plan for capacity utilisation </li></ul></ul><ul><ul><li>Importance of distributions networks </li></ul></ul><ul><ul><li>Need for the implementation of strategies and actions to accommodate malcontent customers from non-returnable services </li></ul></ul>
  23. 28. The Perishability of Services <ul><li>Criticism to the adequacy of perishability as a line of demarcation between goods and services </li></ul><ul><ul><li>“ Under conditions of fierce competition and financial stringency, the impact on profit of unsold stocks is as severe for manufacturers of fast moving consumer goods as it is for the service industry” (Middleton, 1983) </li></ul></ul><ul><ul><li>… requirement of ‘agility’ in today’s markets? </li></ul></ul>
  24. 29. The Service Vision <ul><li>Service Strategy. </li></ul><ul><li>Service Processes. </li></ul><ul><li>Perfecting the Service System. </li></ul><ul><li>Service Design and Blueprinting. </li></ul><ul><li>Managing the ‘critical encounters.’ </li></ul><ul><li>Designing and Managing Service Networks. </li></ul>
  25. 30. Seminar <ul><li>Recently, in Twickenham, Greater London a Marriot Hotel has just been built within the new Rugby Stadium, just around the corner is a large Tesco store. </li></ul><ul><ul><li>Compare and contrast the potential differences in daily priorities between the marketing director of each </li></ul></ul><ul><ul><ul><li>The product </li></ul></ul></ul><ul><ul><ul><li>The customer </li></ul></ul></ul><ul><ul><ul><li>Building relationships </li></ul></ul></ul>
  26. 31. The Expanded Marketing Mix for Services <ul><li>More Ps (I) </li></ul><ul><li>Physical Evidence </li></ul><ul><ul><li>The setting where the service is delivered </li></ul></ul><ul><ul><li>(Zeithaml and Bitner,1996) </li></ul></ul><ul><ul><li>Where the service company and the customer interact </li></ul></ul><ul><ul><li>Any tangible components that facilitate performance or communication of the service </li></ul></ul>
  27. 32. <ul><li>More Ps (I) </li></ul><ul><li>People </li></ul><ul><ul><li>All humans who play a role in service delivery and who influence the perceptions of customers (Zeithaml and Bitner, 1996) </li></ul></ul><ul><ul><li>Service delivery employees (front-line staff) </li></ul></ul><ul><ul><li>The general staff of the service company </li></ul></ul>The Expanded Marketing Mix for Services
  28. 33. The Service ‘Package’ <ul><li>Supporting Facility: </li></ul><ul><ul><li>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><ul><li>Facilitating Goods: </li></ul><ul><ul><li>The material consumed by the buyer or items provided by the consumer. Examples are food items, legal documents, golf clubs, medical history. </li></ul></ul><ul><li>Information: </li></ul><ul><ul><li>Operations data or information that is provided by the customer to enable efficient and customised service. Examples are patient medical records, seats available on a flight, customer preferences, location of customer to dispatch a taxi. </li></ul></ul>
  29. 34. The Service ‘Package’ (cont…) <ul><li>Explicit Services: </li></ul><ul><ul><li>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><ul><li>Implicit Services: </li></ul><ul><ul><li>Psychological benefits or extrinsic features which the consumer may sense only vaguely. Examples are quality of furnishings, security of a well lighted parking lot. </li></ul></ul>
  30. 35. Services as a Service/Product Bundle Element Core Goods Example Core Service Example Business Burtons Business hotel Core Good/Service Business suits Room for the night Peripheral Goods Garment bag Bath robe Peripheral Service Deferred payment plans In house restaurant Variant Coffee lounge Airport shuttle
  31. 38. Seminar <ul><li>Starbucks Service Package </li></ul><ul><ul><li>Core Competancy </li></ul></ul><ul><ul><li>Supporting Facility </li></ul></ul><ul><ul><li>Facilitating Goods </li></ul></ul><ul><ul><li>Information </li></ul></ul><ul><ul><li>Explicit Services </li></ul></ul><ul><ul><li>Implicit Services </li></ul></ul>
  32. 39. Starbucks Questions <ul><li>Given the example of Starbucks, what other services could be combined to “add value” for the customer? </li></ul>
  33. 40. Seminar <ul><li>Examples of hotel brochures... </li></ul><ul><li>10 each team </li></ul><ul><li>Price of 5 star hotel this weekend one night inc breakfast </li></ul>
  34. 41. Next Week - Starbucks Distinctive Service Characteristics <ul><li>How do they manage </li></ul><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>