Service Management and Strategy

Understanding Services:

Nature of Service

Service Strategy

Service

Management

ALLPPT.com _ Free PowerPoint Templates, Diagrams and Charts

James & Mona Fitzsimmons/Sanjeev Bordoloi

Nature of Services

Sector Employment Labor Force Size

in Top 10 Nations by 2010

Nation % World Labor % Agri % Goods % Services

China 21 50 15 35

India 17 60 17 23

US 4.8 2 20 78

Indonesia 3.9 45 16 39

Brazil 3.0 23 24 53

Russia 2.5 12 23 65

Source: http://nationmaster.com

Role of Services in an Economy

INFRASTRUCTURE SERVICE

· Communications

· Transportation

· Utilities

· Banking

PERSONAL SERVICES

· Healthcare

· Restaurants

· Hotels

CONSUMER

(Self-service)

GOVERNMENT SERVICES

· Military

· Education

· Judicial

· Police and fire protection

DISTRIBUTION

SERVICES

· Wholesaling

· Retailing

· Repairing

FINANCIAL SERVICES

· Financing

· Leasing

· Insurance

MANUFACTURING

Services inside company:

· Finance

· Accounting

· Legal

· R&D and design

BUSINESS SERVICES

· Consulting

· Auditing

· Advertising

· Waste disposal

1-3

Source: Guile & Quinn, Technology in Services, National Academy Press, 1988

What is Service?

Some definitions

Service is an activity or series of activities of more or less intangible nature that normally take place in interaction between customer and service employees and/or goods of the service provider, which are provides as a solutions to customer problems

Christian Gronroos, 1990

Services are deeds, processes, and performances.

Valarie Zeithaml & Mary Jo Bitner, 2006

A service is a time-perishable, intangible experience performed for a customer acting in the role of a co-producer.

James Fitzsimmons, 2007

http://heybeb.com/

Click it

1. What is that?

2. Is it a service or a product?

What are the characteristics?

3. What are the core experience and features?

Distinctive Characteristics of Services

Simultaneity

opportunities for personal selling, interaction creates customer perceptions of quality

Perishability

cannot inventory, opportunity loss of idle

capacity, need to match supply with demand

Intangibility

creative advertising, no patent protection,

importance of reputation

Heterogeneity

customer involvement in delivery process

results in variability

Customer Participation in the Service Process

attention to facility design, opportunities for

co-production, concern for customer and

employee behavior

Typology of Services in the 21st Century

Core Experience Essential Feature Examples

Creative Present ideas Advertising, theater

Enabling Act as intermediary Transportation, communications

Experiential Presence of customer Massage, theme park

Extending Extend and maintain Warranty, health check

Entrusted Contractual agreement Service/repair, portfolio mgt.

Information Access to information Internet search engine

Innovation Facilitate new concepts R&D services, product testing

Problem solving Access to specialists Consultants, counseling

Quality of life Improve well-being Healthcare, recreation, tourism

Regulation Establish rules and regulations Environment, legal, patents

Source of Service Sector Growth

How Services can boost up its sales?

Information Technology (e.g. Internet)

InnovationPush theory (e.g. Post-it)Pull theoryServices derived from productsExploiting information (e.g. Auto part sales)

Changing DemographicsAging of the populationTwo-income familiesGrowth in number of single peopleHome as sanctuary

Service PackageA bundle of goods and services with information

that is provided in some environment.

ServiceExperience

Explicit Services

Implicit Services

Supporting Facility

FacilitatingGoodsInformation

Bed, labdrugs,Med infoPain absenseCourtesy doc

Service Package (2)

Supporting Facility: The physical resources that must be

in place before a service can be sold.

Facilitating Goods: The material consumed by the

buyer or items provided by the consumer.

Information: Operations data or information that is

provided by the customer to enable efficient and

customized service.

Explicit Services: Benefits readily observable by the senses

Implicit Services: Psychological benefits or extrinsic features which the consumer may sense only vaguely.

Service Process Matrix

• Lawyers

• Accountants

• Retailing

• Schools

• Hospitals

• Auto Repair

• Airline

• Hotel Resort

Service

Factory

Service

Shop

Professional

Service

Mass

Service

Degre

e o

f la

bor

inte

nsi

ty*r

atio labor

cost

to c

apital co

st

Degree of interaction & customization* customer ability to affect services

Challenges for Service Managers

Low

cust

om

ization

• Making

service

“warm”

• Physical

surroundings

• Rigid

hierarchy

• Marketing

Hig

h c

ust

om

ization

• Maintain

quality

• Employee

loyalty

• Fighting cost

increases

• Reacting to

customer

intervention

in process

Low

labor in

tensity • Capital

decision

• Technologica

l advances

• Managing

peaks and

off peaks

• Technologica

l advances

• Managing

peaks and

off peaks

Hig

h labor in

tensity • Hiring &

Training

• Scheduling

workforces

• Employee

welfare

• Start-up new

units

Management problems are common across service industries

Service Strategy

Porter’s 3 Generic Strategy

Overall Cost Leadership

Differentiation

Focus

Overall Cost Leadership

Requirement

High capital

investment

Aggressive

pricing

Efficient-scale

facilities, tight

cost

Approaches

Seeking out low-

cost customer

Standardizing

Custom Service

Reducing

Personal Element

Reducing

Network Cost

Taking Service

Operation Offline

Lowest cost producer

DifferentiationUnique services, creating customer loyalty

Requirement

Marketing

Research

Creative

development

team

Approaches

Making

intangible to

tangible

Customizing

standard product

Reducing

perceived risk

Giving attention

to personnel

training

Controlling

quality

FocusSpecific target market who offered lower cost or unique services

Requirement

Lower investment

in resources

Able to find

particular group

Approaches

Segmenting the

market

Setting

expectation below

performance

Jakarta Eye Center

Winning Customer in the marketplace

Service purchase decisions will be based on:

• Must beQualifier

• Delighter (variety)

• Customer choiceWinner

• Dissatisfied for customerLoser

TrustPriceGuarantee

a. Create service packages for Aeon!b. Identify its challenges related with service process matrix!c. Identify how Aeon Mall can win the customer in Jakarta/Tangerang! (qualifier, winner, loser)

Work in Group @ class

Next week

• Present your business project by using concept from this meeting (ch. 1,2)

• Prepare a ppt handout for FM (readable)

• Every group must be prepared