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Management
Introduction
FALL 2006
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Course Logistics
• Website
– http://www4.ncsu.edu/~montoya/SMsyllabus.html
– PPT files available by 12noon day of class
• eBook will be available in a week
– Chapter copies for now
• Co-Production in action!!
Course Logistics
• Website
– http://www4.ncsu.edu/~montoya/SMsyllabus.html
– PPT files available by 12noon day of class
• eBook will be available in a week
– Chapter copies for now
• Co-Production in action!!
3
Introduction to Services
• Explain what services are and identify important trends in
services.
• Explain the need for special services management concepts
and practices and why the need has developed and is
accelerating.
• Explore the profound impact of technology on service.
• Outline the basic differences between goods and services
and the resulting challenges and opportunities for service
businesses.
• Introduce the services variables and the philosophy of
customer focus, as powerful frameworks and themes for
managing services.
Service Definitions
• Services are deeds, processes, and
performances.
Valarie Zeithaml & Mary Jo Bitner
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Definition of Service Firms
Service enterprises are organizations that
facilitate the production and distribution of
goods, support other firms in meeting their
goals, and add value to our personal lives.
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Percent Service Employment for
Selected Nations
70
60
50
40
30
20
10
0 Services
1929 1948 1969 1977 1984 1999 Manufacturing
Year Mining & Agriculture
Source: Survey of Current Business, April 1998, Table B.8, July 1988, Table 6.6B, and July 1992, Table 6.4C; Eli
Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): 31-39.
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Percent of U.S. Gross
Domestic
Product by Industry
80
70
60
Percent of GDP
50
40
30
20
10
0 Services
1948 1959 1967 1977 1987 1999 Manufacturing
Year Mining & Agriculture
Source: Survey of Current Business, August 1996, Table 11, April 1998, Table B.3; Eli Ginzberg and George J.
Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): 31-39.
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Contributions of Service Industries
to
U.S. Gross Domestic Product
Source: Inside Sam’s $100 Billion Growth Machine, by David Kirkpatrick, Fortune, June 14, 2004, p 86.
Figure 1.2
Tangibility Spectrum
Salt
Soft Drinks
Detergents
Automobiles
CosmeticsFast-food
Outlets
Intangible
Dominant
Tangible
Dominant Fast-food
Outlets
Advertising
Agencies
Airlines
Investment
Management
Consulting
Teaching
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Characteristics of Services
Compared to Goods
Intangibility Heterogeneity
Simultaneous
Production
and Perishability
Consumption
Implications of Intangibility
• Services cannot be inventoried
• Pricing is difficult
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Implications of Heterogeneity
• Service delivery and customer satisfaction
depend on employee and customer actions
Implications of Simultaneous
Production and Consumption
• Customers participate in and affect the transaction
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Implications of Perishability
• It is difficult to synchronize supply and demand
with services
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An Integrated Approach to Service
Management
The Eight Service Components (Variables)
• Product Elements
• Place, Cyberspace, and Time
• Promotion and Education
• Price and Other User Outlays
+ Process
+ Productivity and Quality
+ People
+ Physical Evidence
Service Variables
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Example Service/Product Bundle
Element Core Goods Core Service
Example Example
Business Custom clothier Business hotel
Low High
Service factory Service shop
* Airlines * Hospitals
Low * Trucking * Auto repair
* Hotels * Other repair services
Degree of labor * Resorts and recreation
Intensity Mass service: Professional service
* Retailing * Doctors
High * Wholesaling * Lawyers
* Schools * Accountants
* Retail aspects of * Architects
commercial banking
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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 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.
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Strategic Service Classification
Nature of the Service Act
Direct Recipient of the Service
Nature of
the Service Ac t People Things
People’s bodies: Physical possessions:
Education Banking
Intangible ac tions Broadcasting Legal services
Information services Accounting
Theaters Securities
Museums Insurance
Nature of Service
Delivery “Membership” relationship No formal relationship
Insurance Radio station
Telephone subscription Police protection
Continuous delivery Electric Utility Lighthouse
of service Banking Publi c Highway
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Strategic Service Classification
Customization and Judgment
High Low
Surgery Preventive health programs
High Taxi services Education (large classes)
Extent to Which
Gourmet restaurant Family restaurant
Personnel Exercise
Judgment in Meeting Telephone service Public transportation
Customer Needs Hotel services Spectator sports
Low Retail banking Movie theater
Cafeteria Institutional food service
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Strategic Service Classification
Method of Service Delivery
Availability of Service Outlets
Nature of Interaction
between Customer and
Service Organization Single site Multiple site
Customer travels to Theater Bus service
service organization Barbershop Fast -food chain
Tax i
Service provide r Mail delivery
Pest control service
travels to customer AAA emergency repairs
Taxi
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Xpresso Lube Facility
• Supporting Facility
• Facilitating Goods
• Information
• Explicit Services
• Implicit Services
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Xpresso Lube’s Distinctive
Service Characteristics
• Intangibility
• Perishability
• Heterogeneity
• Simultaneity
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Beyond Xpresso Lube
Next Time …
• Read Chapters 1, 2, 3, 5
• Review website
• Questions???
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