2. Learning Objectives
Classify a service into one of four categories
using the service process matrix.
Describe a service using the four dimensions
of the service package.
Discuss the managerial implications of the
distinctive characteristics of a service
operation.
Discuss the insights obtained from a strategic
classification of services.
Discuss the role of a service manager from
an open-systems view of service.
3. Proportion of Goods and
Services in Purchase Bundle
Goods Services
100% 75 50 25 0 25 50 75 100%
Self-service gasoline…………….
Personal computer……………
Office copier………………….
Fast-food restaurant…………
Gourmet restaurant…………
Auto repair……………………
Airline flight…………………….
Haircut………………………….
4. The Service Process Matrix
Degree Degree of Interaction and Customization
of labor Intensity Low High
Service factory: Service shop:
* Airlines * Hospitals
Low * Trucking * Auto repair
* Hotels * Other repair services
* Resorts and recreation
Mass service: Professional service:
* Retailing * Doctors
High * Wholesaling * Lawyers
* Schools * Accountants
* Retail aspects of * Architects
commercial banking
5. 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.
Facilitating Goods: The material
purchased or consumed by the buyer or
items provided by the consumer.
Examples are food items, auto parts,
legal documents, golf clubs.
6. 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.
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.
7. Unique Characteristics of Services
Intangibility: creative advertising, no patient
protection, importance of reputation
Perishability: cannot inventory, opportunity loss of
idle capacity, need to match supply with demand
Heterogeneity: customer participation in delivery
process results in variability
Simultaneity: opportunities for personal selling,
interaction creates customer perceptions of quality
Customer Participation in the Service Process:
attention to facility design but opportunities for co-
production
8. Service Process Orientation
Customer as Coproducer
Front and Back Office Perspectives
Service Profit Chain Focus on Internal
and External Customers
Quality (perceptions vs expectations)
Focus on Both Efficiency and
Effectiveness
Use IT as Productivity Enabler for Both
Internal and External Customers
9. Strategic Service Classification
(Nature of the Service Act)
Direct Recipient of the Service
Nature of
the Service Act People Things
People’s bodies: Physical possessions:
Health care Freight transportation
Passenger transportation Equipment repair and maintenance
Tangible actions Beauty salons Veterinary care
Exercise clinics Janitorial services
Restaurants Laundry and dry cleaning
Haircutting Landscaping/lawn care
People’s minds: Intangible assets:
Education Banking
Intangible actions Broadcasting Legal services
Information services Accounting
Theaters Securities
Museums Insurance
10. 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
Telephone subscription Police protection
Continuous delivery College enrollment Lighthouse
of service Banking Public Highway
American Automobile association
Long-distance phone calls Restaurant
Theater series subscription Mail service
Discrete transactions Commuter ticket or transit pass Toll highway
Sam’s Wholesale Club Movie theater
Egghead computer software Public transportation
11. Strategic Service Classification
(Customization and Judgment)
Extent to Which Service Characteristics Are Customized
Extent to Which Personnel
Exercise Judgment in Meeting
Customer Needs High Low
Professional services Education (large classes)
Surgery Preventive health programs
Taxi services College food service
High Beautician
Plumber
Gourmet restaurant
Telephone service Public transportation
Hotel services Routine appliance repair
Low Retail banking (excl. major loans) Movie theater
Family restaurant Spectator sports
Fast-food restaurant
12. 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 Natural gas Legal services
usually be met Telephone Banking
without a major delay Hospital maternity unit Laundry and dry cleaning
Police and fire emergencies
Accounting and tax preparation Services similar to those above
Peak demand regularly Passenger transportation but with insufficient capacity
exceeds capacity Hotels and motels for their base level of
Restaurants business
13. Strategic Service Classification
(Method of Service Delivery)
Availability of Service Outlets
Nature of Interaction
between Customer and
Service Organization Single site Multiple site
Customer goes to Theater Bus service
service organization Barbershop Fast-food chain
Service organization Lawn care service Mail delivery
comes to customer Pest control service AAA emergency repairs
Taxi
Customer and service Credit card company Broadcast network
organization transact at Local TV station Telephone company
arm’s length (mail or
electronic communications)
14. Open Systems View of Service
Operations
Service Process Consumer Evaluation
Consumer arrivals Consumer participant departures Criteria
(input) Consumer-Provider ( output) Measurement
interface
Control Monitor
Customer demand Service operations manager Service personnel
Production function:
Perceived needs Alter Monitor and control process Schedule Empowerment
Location demand Marketing function: supply Training
Interact with consumers Attitudes
Control demand
Modify as necessary
Define standard
Service package
Supporting facility
Communicate Facilitating goods Basis of
by advertising Explicit services selection
Implicit services
15. Village Volvo’s Service Package
Supporting Facility
Facilitating Goods
Explicit Services
Implicit Services
17. Managing Village Volvo
How could Village Volvo manage its
back office (repair operations) like a
factory?
How can Village Volvo differentiate itself
from Volvo dealers?
18. Topics for Discussion
What are the characteristics of services that will be
most appropriate for Internet delivery?
When does collecting information through service
membership become an invasion of privacy?
What are some management problems associated
with allowing service employees to exercise
judgement in meeting customer needs?
What factors are important for a manager to consider
when attempting to enhance a service firm’s image?
