An Introduction to Services

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Goods Versus Services

Goods

Objects, Devices, Things

Services

Deeds, Efforts, Performances

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The Scale of Market Entities

Tangible

vs. Intangible dominant

TD

ID

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The Molecular Model

Products

have both tangible and intangible components A management tool Can identify and serve customers better

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The Benefit Concept

Encapsulation

of benefits in the consumers mind Tide

Cleanliness Whiteness Motherhood

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The Benefit Concept

Most

services deliver the bundle of benefits through the experience that is created for the consumer servuction model provides a framework for understanding the consumers experience

The

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The Servuction Model

Inanimate Environment Invisible organization and systems Contact Personnel Or Service Provider Customer A

Customer B

Invisible

Visible Bundle of service benefits received by Customer A

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The Increasing Demand for Service Knowledge

Changes
The

in management perspective

Industrial Model vs. The Marketfocused Model

Growth

in service sector employment Service sector contributions to the world economy Deregulation
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The Demand For Knowledge: Contributions To The Economy

Economic

impact: The service sector accounts for about 75% of the United States gross domestic product (GDP) The majority of industries in the U.S. economy do not produce, they perform

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The Demand for Knowledge: 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%
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The Industrial Model

Sales

Revenues are a function of:

location

strategies sales promotions advertising

Replaces full-time personnel with part-time personnel to reduce costs

Places a higher value on upper and middle managers

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The Industrial Model

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 need to go to a supervisor for approval

believes most employees are indifferent, unskilled, and incapable of completing complex tasks. performance expectations are low wages are kept low few opportunities for advancement
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Consequences of the Industrial Model

(employee)

Guarantees a cycle-of-failure High employee turnover rate 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 focuses only on product knowledge little, if any, company benefits
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superficial training

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 employees customers shareholders country
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Overall the industrial approach is bad for:

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
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The Services Triangle

The service strategy The organization exists to serve the needs of the people who serve the customer

The company exists to serve the customer

The customer The systems

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The people

The Services Triangle

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 (systems)

A.T.M. machines cramped airline seats

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The Services Triangle

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

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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 their every activity) data is made available to the front-line

Recognizes that employee turnover and customer satisfaction are closely related

tie pay to performance focus on selection and training of personnel better trained, provide better service, require less supervision
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Characteristics of the Market-focused Model

Employ
better

more full-time employees

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

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