Operations in service industry 3

By
Dr. Swatantra Kumar

Dr. Swatantra Kumar, SSVGI, Bareilly

 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 consumed by the buyer or
items provided by the consumer. Examples are food items,
legal documents, golf clubs, medical history.
 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.


 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.


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 banking * Architects


 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?
 Illustrate the “distinctive characteristics of service
operations” for a service with which you are familiar.
 What factors are important for a manager to consider
when attempting to enhance a service firm’s image?


 On the basis of end user
 On the basis of degree of tangibility
 Degree of customer contact
 Degree of expertise
 Profit orientation


 Business services
 Consumer services
 Govt.


 Purely intangible
 Services with tangible inputs
 Products with service inputs


 Low customer contact
 High Customer contact


 High
 Moderate
 Low


 For profit
 Not for profit


 Goods are tangible whereas services are
intangible
 Customers participate in many service
processes, activities and transactions
 The demand for services is more difficult to
predict than the demand for goods
 Services can not be stored as physical
inventory
 Service management skills are paramount to
a successful service encounter

 Service facilities typically need to be in close
proximity to the customer
 Patents do not protect services


Salt
 Soft Drinks
 Detergents
 Automobiles
 CosmeticsFast-food
 Outlets
 Intangible
Dominant

Tangible

Dominant Fast-food
Outlets 
Advertising
Agencies

Airlines 
Investment
Management 
Consulting 
Teaching

 “you’ll never have product or price advantage
again. They can be easily duplicated, but a
strong customer service culture can’t be
copied” – Jerry Fritz, Director of Management Institute
University of Wisconsin, Madison, WI


 Intangibility
 Perishability
 Heterogeneity/ non-standardization/
variability
 inseparability


 No possibility of the customer to see, touch
or feel the service proposition before or
during its purchase.
 No impulse purchase
 Very difficult to evaluate or measure quality
in service
 The customer cannot stake any claim of
ownership or possession of the service
proposition: he can only experience the offer

 Services cannot be inventoried

 Services cannot be easily patented

 Services cannot be readily displayed or
communicated

 Pricing is difficult


 Simultaneous production and consumption
 They can’t be stored and reproduced
 Example: Business school enrolments;
cinema show; rail/air travel reservation, they
all expire with time
 Time is irrecoverable and so as service


 It is difficult to synchronize supply and
demand with services

 Services cannot be returned or resold


 Inconsistent quality and delivery (due to
human element)


 Service delivery and customer satisfaction
depend on employee and customer actions

 Service quality depends on many
uncontrollable factors

 There is no sure knowledge that the service
delivered matches what was planned and
promoted

 We can’t have any new Gazals from
Legendary Jagjit Singh (of course the old
ones are preserved and can be reproduced)
 People is service (both provider and recipient
are important)
 For heart surgery you need the doctor and
the patient.


 Customers participate in and affect the
transaction

 Customers affect each other

 Employees affect the service outcome

 Mass production is difficult


How to address the unique
characteristics of the service
industry


 These are the ways in which intangibility can
be overcome
 Visualization
 Association
 Physical Representation
 Documentation
 Facts and figures


 Beautiful looking internet sites
 Beautiful building and landscapes at
institutions
 Well dressed staff at Hotels/hospitals
 Big offices of real estate brokers


 Over marketing
 Managing Demand ( demand states)
 Managing Supply (goods, systems and
processes, people)


 Differential pricing at Cinema theaters
 Peak & off peak offers at Holiday resorts
 Happy hours at restaurant


 Training of internal customers
 Recruitment and selection of internal
customers
 Training of external customers
 automation


 Automation (ATMs for banking services)
 Training is critical (as most service businesses
are people intensive)


 Training of internal customers
 Video conferencing
 Robotics


 All business organizations are functionally
integrated.
 Hence functions overlap and interact
 Service operations and service marketing are
intensely affected by each other as the
production and consumption of services is
simultaneous


 All elements within the control of the firm that
communicate the firm’s capabilities and image
to customers or that influence customer
satisfaction with the firm’s product and
services:
 Product
 Price
 Place
 Promotion


 Product
 Price
 Place
 Promotion
 People
 All human actors who play a part in service delivery and thus influence the
buyer’s perceptions: namely, the firm’s personnel, the customer, and other
customers in the service environment.
 Physical Evidence
 The environment in which the service is delivered and where the firm and
customer interact, and any tangible components that facilitate performance or
communication of the service.
 Process
 The actual procedures, mechanisms, and flow of activities by which the service
is delivered—the service delivery and operating systems.


 Service Culture
 The Critical Importance of Service
Employees
 Boundary-Spanning Roles
 Strategies for Delivering Service
Quality Through People
 Customer-Oriented Service
Delivery

“A culture where an appreciation for good
service exists, and where giving good service
to internal as well as ultimate, external
customers, is considered a natural way of life
and one of the most important norms by
everyone in the organization.”
- Christian Gronroos
(1990)


 They are the service.
 They are the organization in the customer’s
eyes.
 They are the brand.
 They are marketers.
 Their importance is evident in:
 the services marketing mix (people)
 the service-profit chain
 the services triangle


Company
(Management)

Internal Marketing External Marketing
“Enabling the promise” “Making the promise”

Employees Customers
Interactive Marketing
“Delivering the promise”

 Who are they?
 “boundary spanners”
 What are these jobs like?
 emotional labor
 many sources of potential conflict
▪ person/role
▪ organization/client
 quality/productivity tradeoffs


External Environment

Internal Environment

 Person versus role

 Organization versus client

 Client versus client


Hire for service
competencies and
service
Compete for inclination Be the
the best preferred
people employer

Measure and Train for
reward strong technical and
Hire the
service interactive
performers
right people skills

Customer- Develop
Treat Retain the people to
employees as Oriented Empower
best deliver
customers Service service
employees
people
Delivery quality

Include Provide
employees in needed support Promote
the company’s systems teamwork
vision

Develop Measure
service-oriented internal service
Provide
internal quality
supportive
processes
technology and
equipment


Servicescape Other tangibles

Facility exterior Business cards
Exterior design Stationery
Signage Billing statements
Parking Reports
Landscape Employee dress
Surrounding environment Uniforms
Brochures
Facility interior Web pages
Interior design Virtual servicescape
Equipment
Signage
Layout
Air quality/temperature

 Is a clearly defined set of tangible (goods
content) and intangible (Service-content)
features that the customer recognizes, pays
for, uses, or experiences
 CBP consists of a primary good or services
coupled with peripheral goods and/or
services, and sometimes a variant
 A primary good or service is the core offering
that attracts customers and responds to their
primary wants and needs.

 Peripheral goods or services are those that
are not essential to the primary good or
service, but enhance it.
 A variant is a CBP attribute that departs from
the standard CBP and is normally location or
firm specific.


Peripheral goods Variant

Free Kids
wash play
Anytime area

High
Primary Good speed
Free internet
Coffee Vehicle
& tea

Replacement
Purchasing Peripheral
parts
and services
leasing


 Think of a service
 May be an existing or new idea
 Draft a plan for service creation and delivery.
Create primary good/service, peripheral
goods/services and variant.


Operations in service industry 3

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