Hapter: N Ntroduction To Ervices

Chapter 1
An Introduction to Services
COPYRIGHT 2002 Thomson Learning, Inc. Thomson Learning is a trademark used herein under license.
ALL RIGHTS RESERVED.
WHAT IS A SERVICE?
The Distinction is Unclear:
The Scale of Market Entities
&
The Molecular Model
WHAT IS A SERVICE?
In General:
Goods
Objects, Devices, Things
Services
Deeds, Efforts, Performances
THE BENEFIT CONCEPT

Encapsulation
of benefits in the consumers
mind
Tide
Cleanliness
Whiteness
Motherhood
THE BENEFIT CONCEPT

Services
deliver the bundle of benefits

through the experience that is created for
the consumer
The
servuction model provides a

framework for understanding the
consumers experience
The Servuction
Model
Inanimate
Environment
Invisible
organization
and systems
Invisible
Customer A
Contact
Personnel
Or
Service
Provider
Customer B
Visible
Bundle of service
benefits received
by Customer A
THE INCREASING DEMAND

FOR SERVICE KNOWLEDGE
Changes
in management perspective
The
Industrial Model vs. The Market-focused

Model
Growth
in service sector employment

Service sector contributions to the world
economy
Deregulation
THE DEMAND FOR KNOWLDEGE:

SERVICE SECTOR EMPLOYMENT
Service Sector
Employment:
78% in United States
73% in Great Britain
62% in Japan
57% in Germany
90% of All Jobs by
2020
*42% of Work
New Job Creation:

80% of All New Jobs
(1980-1990)
90% of All New Jobs
(1990-2000)
88% of All Jobs by
2005
Force is Providing Some Form of Personal Service
THE DEMAND FOR KNOWLEDGE:

CONTRIBUTIONS TO THE ECONOMY
Economic
impact:
The service sector accounts for over 70% of
the United States gross domestic product
(GDP)
The majority of industries in the U.S.
economy do not produce, they perform

THE IMPACT OF DEREGULATION
Effect of
Deregulations:
No demand for services knowledge when
demand exceeded supply and competitive
pressures were few
Between 1980-1992
U.S. airlines declined from 36 to 12

the number of trucking companies that failed during the
1980s was more than the previous 45 years combined
commercial banks declined by 14%

THE IMPACT OF DEREGULATION
Effect of Deregulations (continued):
Knowledge is needed in nonprice issues:
customer
service
customer retention
image enhancement
transforming public contact personnel
into marketing-oriented personnel
THE INDUSTRIAL MODEL

Sales
Revenues are a function of:
location
Strategies
sales Promotions
advertising

(continued)
Labor
and operating costs should be kept

as low as possible
better
to rely on machines than humans

narrowly defined jobs
Leave little room for discretion
believes
most employees are indifferent,

unskilled, and incapable of completing
complex tasks.
performance expectations are low
wages are kept low
few opportunities for advancement

(continued)
Places
a higher value on upper and middle

managers
Replaces full-time personnel with part-time
personnel to reduce costs
CONSEQUENCES OF
(employee)
Guarantees a cycle-of-failure
Encourages front-line personnel to be
indifferent to problems
no
opportunity for advancement (dead-end

jobs)
poor pay
some companies let employees go before mandatory

raises
CONSEQUENCES OF
(employee)
poor pay has created a new class of migrant worker
16 million people now travel from one short-term
job to another
superficial
training
focuses only on product knowledge

little, if any, company benefits
Prohibits
employees from taking

discretionary action
High employee turnover rate
CONSEQUENCES
OF THE INDUSTRIAL MODEL
(customers)
Customer dissatisfaction
2/3
of customers defect, not due to the product,

but due to the unhelpfulness of the provider
flat and declining sales revenues
Overall
the industrial approach is bad for:
employees
customers
shareholders
country
THE MARKET-FOCUSED
MANAGEMENT MODEL
Purpose
of the firm is to serve the customer

Service delivery is the focus of the system
and the overall differential advantage in
terms of competitive advantage
The services triangle provides a framework
for the services model
THE SERVICES TRIANGLE

The
company
exists to serve
the customer
The
service
strateg
y
The organization
exists to serve the
needs of the people
who serve the
customer
The
custome
r
The
systems
The
people

1. Communicate the service strategy to the customer
2. Customer/employee interaction:
greatest
opportunity for gains and losses
moments-of-truth
critical
incidents
3. Customer/procedures & physical hardware
A.T.M. machines
cramped airline seats

4. Organizational systems may prevent
employees from giving good service
5. Physical and administrative systems
should flow logically from the service
strategy
6. Good service starts at the top
*MGT. should Walk What They Talk and provide:
-sense of focus
-clarity
-priorities
CHARACTERISTICS OF THE
MARKET-FOCUSED MODEL
Believes
employees want to do good work
invests
in people as much as machines

technology is used to assist people (not to
monitor there every activity)
data is made available to the front-line
(continued)
Recognizes that employee turnover and
customer satisfaction are closely related
tie
pay to performance
focus on selection and training of personnel
Ryder Truck
no training (41% turnover)
received training (19% turnover)
better
trained, provide better service, require

less supervision
(continued)
Employ more full-time employees
better
for customers and employees

companies that pay more are finding that as a
percentage of sales, labor costs are actually
lower than industry averages

Hapter: N Ntroduction To Ervices

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Chapter 1

Objects, Devices, Things

Deeds, Efforts, Performances

THE BENEFIT CONCEPT

of benefits in the consumers

THE BENEFIT CONCEPT

deliver the bundle of benefits

servuction model provides a

THE INCREASING DEMAND

Industrial Model vs. The Market-focused

in service sector employment

THE DEMAND FOR KNOWLDEGE:

New Job Creation:

Force is Providing Some Form of Personal Service

THE DEMAND FOR KNOWLEDGE:

THE DEMAND FOR KNOWLEDGE:

U.S. airlines declined from 36 to 12

THE DEMAND FOR KNOWLEDGE:

THE INDUSTRIAL MODEL

Revenues are a function of:

THE INDUSTRIAL MODEL

and operating costs should be kept

to rely on machines than humans

Leave little room for discretion

most employees are indifferent,

THE INDUSTRIAL MODEL

a higher value on upper and middle

opportunity for advancement (dead-end

some companies let employees go before mandatory

focuses only on product knowledge

employees from taking

of customers defect, not due to the product,

the industrial approach is bad for:

of the firm is to serve the customer

THE SERVICES TRIANGLE

THE SERVICES TRIANGLE

opportunity for gains and losses

3. Customer/procedures & physical hardware

cramped airline seats

THE SERVICES TRIANGLE

employees want to do good work

in people as much as machines

trained, provide better service, require

for customers and employees

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