Service: The New FrontierService: The New Frontier

Welcome toWelcome to

Service ManagementService Management

Professor Drew RosenProfessor Drew Rosen

Learning ObjectivesLearning Objectives

Describe the central role of services in an economy.Describe the central role of services in an economy.

To explore the differences between manufacturing and To explore the differences between manufacturing and services.services.

Explore the role of services within manufacturing and Explore the role of services within manufacturing and manufacturing’s reliance on services.manufacturing’s reliance on services.

Understanding service management/service operationsUnderstanding service management/service operations

Describe and contrast the features of the new experience Describe and contrast the features of the new experience economy with that of previous economies.economy with that of previous economies.

Interactive Role of ServicesInteractive Role of Services

Service DefinitionsService Definitions

A Service is a Time-perishable, Intangible A Service is a Time-perishable, Intangible Experience Performed for a Customer Acting Experience Performed for a Customer Acting in the Role of a Coproducer.in the Role of a Coproducer.

James FitzsimmonsJames Fitzsimmons

Services are deeds, processes, and Services are deeds, processes, and performances.performances.

Valarie Zeithaml & Mary Jo Valarie Zeithaml & Mary Jo BitnerBitner

Definition of Service FirmsDefinition of Service Firms

Service Enterprises are Organizations that Service Enterprises are Organizations that Facilitate the Production and Distribution of Facilitate the Production and Distribution of Goods, Support Other Firms in Meeting Goods, Support Other Firms in Meeting Their Goals, and Their Goals, and Add ValueAdd Value to Our Personal to Our Personal Lives.Lives.

James James FitzsimmonsFitzsimmons

Stages of Economic Stages of Economic DevelopmentDevelopment

FeaturesFeatures

Pre- Use of StandardPre- Use of Standard

dominant human Unit of of living dominant human Unit of of living

Society Game activity labor social life measure Structure TechnologySociety Game activity labor social life measure Structure Technology

Pre- Against Agriculture Raw Extended Sub- Routine Simple handPre- Against Agriculture Raw Extended Sub- Routine Simple hand

Industrial Nature Mining muscle household sistence Traditional toolsIndustrial Nature Mining muscle household sistence Traditional tools

power Authoritative power Authoritative

Industrial Against Goods Machine Individual Quantity Bureaucratic Machines Industrial Against Goods Machine Individual Quantity Bureaucratic Machines

fabricated production tending of goods Hierarchical fabricated production tending of goods Hierarchical

naturenature

Post- Among Services Artistic Community Quality of Inter- InformationPost- Among Services Artistic Community Quality of Inter- Information

industrial Persons Creative life in terms dependentindustrial Persons Creative life in terms dependent

Intellectual of health, GlobalIntellectual of health, Global

education,education,

recreation recreation

The Service Revolution

“There are no such things as serviceindustries. There are only industries whose service components are greater or less then those of other industries. Everybody is in service”!

Theodore Levitt

Global Employment, % Share

Percent Employment in ServiceJobs, by Nation, 1983-1997

Growth In Employment

Global Private Sector Services, 1980-1997, %

Services as % of GDP

Services DefinedServices Defined

Service IndustryService Industry Customer ServiceCustomer Service Field ServiceField Service

Why Services Are Important

Increased Competition Manufacturing Support Makes Economic Sense

“When the quality and price of competingproducts are similar or nearly identical,service activities can ‘differentiate’undifferentiated products in the mind ofthe customer”

Glaskowsky et al.

Relative Importance of Service Activities

Relative Importance of Marketing Variables

ProductPriceServiceSales EffortTOTAL

All

Indust

ries

All M

an

ufa

ctu

rin

g

Chem

icals

&Pla

stic

s M

fg.

Food M

fg.

36232318100

38242018100

38261818100

36271522100

Ele

ctro

nic

s M

fg.

Paper

Mfg

.

All

Oth

er

Manufa

cturi

ng

48142216100

29262421100

38252215100

All M

erc

han

dis

ing

Consu

mer

Goods

Merc

handis

ing

Indust

rial G

oods

Merc

handis

ing

30222721100

31232323100

28173916100

National Council of Physical Distribution Management

Parallel Product/Service DesignParallel Product/Service Design

ProductConcept

Product Design

ProductDelivery

ServiceConcept

ServiceDesign

ServiceDelivery

SuppliersTier 2

SuppliersTier 1

Manufacturing

Inbound Logistics

Operations

Outbound Logistics

CUSTOME

RS

DistributorsRetailers

The Supply Chain

Information

Manufacturing

ServiceIntermediary

CommercialServices User(Self-Service)

Consumer(Self-Service)

R & D

ProductDesign

DistributionServices

WholesalingRetailingRepairing

Service IndustriesCommunications, Transportation,

Utilities, Health Care, Banking, etc.

Private Business ServicesSupporting Manufacturing,

Accounting, Legal, Consulting, Software, Maintenance

Government Support ServicesWaste Disposal Services, Road Maintenance,

Education, Health Support, Standards,Police and Fire Protection, etc.

Services Inside theCompany--Design, Legal, AccountingAdvertising, etc.

Service and ProfitabilityService and Profitability

Reduced operating expensesReduced operating expenses Competitive differentiationCompetitive differentiation Increased qualityIncreased quality Increased efficiencyIncreased efficiency Increased responsivenessIncreased responsiveness Increased market ShareIncreased market Share Increased customer loyaltyIncreased customer loyalty

Contributors to Market Share

MarketShare

Time

Market ShareDue to

Product Features

Market ShareDue to

Captive Markets

Market ShareDue to

Service Activities

1 2 3 4 5

20%

40%

60%

80%

100%

Verydissatisfied

Dissatisfied Neutral Satisfied Very satisfied

Loyalt

y (

Rete

nti

on

)

Satisfaction

zone of defection

zone of indifference

zone of affection

Satisfaction and Loyalty

terrorist

apostle

The New Experience EconomyThe New Experience Economy

Economy Agrarian Industrial Service Experience

Function Extract Make Deliver Stage

Nature Fungible Tangible Intangible Memorable

Attribute Natural Standardized Customized Personal

Method ofsupply

Stored inbulk

Inventoried Deliveredon demand

Revealedover time

Seller Trader Manufacturer Provider Stager

Buyer Market User Client Guest

The Four Realms of an ExperienceThe Four Realms of an Experience

Customer Participation

Passive Active

EnvironmentalAbsorption Entertainment

(Movie)Education(Language)

Relationship Immersion Esthetic(Tourist)

Escapist(Skydiving)

Experience Design PrinciplesExperience Design Principles

Theme the Experience (Forum shops)Theme the Experience (Forum shops) Harmonize Impressions with Positive CuesHarmonize Impressions with Positive Cues

(Fort Lauderdale airport parking garage)(Fort Lauderdale airport parking garage) Eliminate Negative CuesEliminate Negative Cues

(Cinemark talking trash containers)(Cinemark talking trash containers) Mix in Memorabilia (Hard Rock T-shirts)Mix in Memorabilia (Hard Rock T-shirts) Engage all Five Senses (Mist in Rainforest)Engage all Five Senses (Mist in Rainforest)

Role of the Service ManagerRole of the Service Manager

Entrepreneurial InnovationEntrepreneurial Innovation Capitalizing on Social TrendsCapitalizing on Social Trends Management ChallengesManagement Challenges

Economies of Scale (MRI scanner)Economies of Scale (MRI scanner)Economies of Scope(Convenience store)Economies of Scope(Convenience store)Complexity (Yield Management)Complexity (Yield Management)Boundary Crossing (Bank vs Brokerage)Boundary Crossing (Bank vs Brokerage)International Competitiveness(Diversity) International Competitiveness(Diversity)

Profits are the result of attention to quality and customer satisfaction, while the reverse is rarely true.

Edwards Deming

Discussion TopicsDiscussion Topics

Is it possible for an economy to be based Is it possible for an economy to be based entirely on services?entirely on services?

Speculate on the effect that the Internet will Speculate on the effect that the Internet will have on the delivery of services.have on the delivery of services.

What is the value of self-service in an What is the value of self-service in an economy? What are the implications?economy? What are the implications?

Comment on the role that marketing plays Comment on the role that marketing plays in the service innovation process.in the service innovation process.

Illustrate how the type of work he or she Illustrate how the type of work he or she does influences a persons lifestyle.does influences a persons lifestyle.