The Nature of Services Mc GrawHillIrwin Copyright 2011

The Nature of Services Mc. Graw-Hill/Irwin Copyright © 2011 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Service-Product Bundle Element Business Core Goods Example Custom clothier Core Service Example Business hotel Core Business suits Room for the night Peripheral Goods Peripheral Service Variant Garment bag Bath robe Deferred payment plans In house restaurant Coffee lounge Airport shuttle 2 -2

Distinctive Characteristics of Services n n n 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 coproduction, concern for customer and employee behavior 2 -3

Non-ownership Classification of Services Type of Service Customer value Examples Management Challenge Goods rental Obtain temporary right to exclusive use Vehicles, tools, furniture, equipment Site selection and maintenance Place and space rental Obtain exclusive use of defined portion of a larger space Hotel room, seat on airplane, storage unit Housekeeping and achieving economies of scale Labor and expertise Hire other people to do a job Car repair, surgery, management consulting Expertise is a renewable resource, but time is perishable Physical facility usage Gain admission to a facility for a period of time Theme park, camp ground, physical fitness gym Queuing and crowd control Network usage Gain access to participate Electric utility, cell phone, internet Availability and pricing decisions 2 -4

Implications of Rental/Usage Paradigm n n n Creates the option of renting a good upon demand rather than purchase. Service often involves selling slices of larger physical entities. Labor and expertise are renewable resources. Time plays a central role in most services. Service pricing should vary with time and availability. Question: Can services in general be described as customers sharing resources? 2 -5

Service Package Supporting Facility Explicit Services Service Experience Information Implicit Services Facilitating Goods 2 -6

The Service Package n n n 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. 2 -7

The Service Package (cont. ) n n 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. 2 -8

Village Volvo’s Service Package n Supporting Facility n Facilitating Goods n Information n Explicit Services n Implicit Services 2 -9

Village Volvo’s Distinctive Service Characteristics n Intangibility n Perishability n Heterogeneity n Simultaneity n Customer Participation in the Service Process 2 -10

Village Volvo’s Service Classification n Nature of the service act n Relationship with customers n Customization and judgement n Nature of demand supply n Method of service delivery 2 -11

Managing Village Volvo n n How could Village Volvo manage its back office (repair operations) like a factory? How can Village Volvo differentiate itself from Volvo dealers? 2 -12

Xpresso Lube Facility 2 -13

Xpresso Lube’s Service Package n Supporting Facility n Facilitating Goods n Information n Explicit Services n Implicit Services 2 -14

Xpresso Lube’s Distinctive Service Characteristics n Intangibility n Perishability n Heterogeneity n Simultaneity n Customer Participation in the Service Process 2 -15

Xpresso Lube’s Service Classification n Nature of the service act n Relationship with customers n Customization and judgement n Nature of demand supply n Method of service delivery 2 -16

Beyond Xpresso Lube n n What elements of Xpresso Lube’s location contribute to its success? Given the example of Xpresso Lube, what other services could be combined to “add value” for the customer? 2 -17