Service: The New Frontier

Welcome to Service Management Professor Drew Rosen Fall 2013

Learning Objectives

Describe the central role of services in an economy.

To explore the differences between manufacturing and services. Explore the role of services within manufacturing and manufacturings reliance on services. Understanding service management/service operations Describe and contrast the features of the new experience economy with that of previous economies.

Interactive Role of Services

Service Definitions
A Service is a Time-perishable, Intangible Experience Performed for a Customer Acting in the Role of a Coproducer. James Fitzsimmons Services are deeds, processes, and performances. Valarie Zeithaml & Mary Jo Bitner

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. James Fitzsimmons

Stages of Economic Development

Features PreUse of dominant human Unit of activity labor social life Agriculture Raw Extended Mining muscle household power Machine Individual tending Standard of living measure Subsistence

Society Game PreAgainst Industrial Nature

Structure Technology Routine Simple hand Traditional tools Authoritative Bureaucratic Machines Hierarchical

Industrial Against Goods fabricated production nature

Quantity of goods

PostAmong industrial Persons

Services

Artistic Community Quality of InterInformation Creative life in terms dependent Intellectual of health, Global education, recreation

The Service Revolution

There are no such things as service industries. 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 Service Jobs, by Nation, 1983-1997

Growth In Employment Global Private Sector Services, 1980-1997, %

Services as % of GDP

Services Defined
Service Industry Customer Service Field Service

Why Services Are Important

Increased Competition Manufacturing Support Makes Economic Sense

When the quality and price of competing products are similar or nearly identical, service activities can differentiate undifferentiated products in the mind of the customer
Glaskowsky et al.

Relative Importance of Service Activities

All Merchandising All Manufacturing Consumer Goods Merchandising 31 23 23 23 100 Electronics Mfg. All Industries Paper Mfg. Food Mfg. Industrial Goods Merchandising 28 17 39 16 100 Chemicals & Plastics Mfg. All Other Manufacturing 38 25 22 15 100

Relative Importance of Marketing Variables

Product Price Service Sales Effort TOTAL

36 23 23 18 100

38 24 20 18 100

38 26 18 18 100

36 27 15 22 100

48 14 22 16 100

29 26 24 21 100

30 22 27 21 100

National Council of Physical Distribution Management

Parallel Product/Service Design

Product Concept Product Design Product Delivery

Service Concept

Service Design

Service Delivery

The Supply Chain

Suppliers Tier 2 Suppliers Tier 1 Distributors Retailers

Manufacturing
Inbound Logistics Operations Outbound Logistics

C U S T O M E R S

Information

Service Industries Communications, Transportation, Utilities, Health Care, Banking, etc.

R&D
Manufacturing Services Inside the Company--Design, Legal, Accounting Advertising, etc. Product Design Distribution Services Wholesaling Retailing Repairing Service Intermediary Commercial Services User (Self-Service)

Consumer (Self-Service)

Private Business Services Supporting Manufacturing, Accounting, Legal, Consulting, Software, Maintenance

Government Support Services Waste Disposal Services, Road Maintenance, Education, Health Support, Standards, Police and Fire Protection, etc.

The Service Revolution

There are no such things as service industries. There are only industries whose service components are greater or less then those of other industries. Everybody is in service
Theodore Levitt

Service and Profitability

Reduced operating expenses Competitive differentiation Increased quality Increased efficiency Increased responsiveness Increased market Share Increased customer loyalty

Contributors to Market Share

Market Share Due to Service Activities

Market Share

Market Share Due to Captive Markets

Market Share Due to Product Features

Time

Satisfaction and Loyalty

Loyalty (Retention)

100% 80% 60% 40% 20% 1 2

zone of affection

apostle

zone of indifference zone of defection

terrorist

4
Satisfied

5
Very satisfied

Dissatisfied Neutral Very dissatisfied

Satisfaction

The New Experience Economy

Economy Function Nature Attribute Method of supply Seller Buyer Agrarian Extract Fungible Natural Stored in bulk Trader Market Industrial Make Tangible Service Deliver Intangible Experience Stage Memorable

Standardized Customized Personal Inventoried Delivered Revealed on demand over time Stager Guest

Manufacturer Provider User Client

The Four Realms of an Experience

Customer Participation Passive Active

Absorption Entertainment Education Environmental (Movie) (Language) Relationship Immersion Esthetic (Tourist) Escapist (Skydiving)

Experience Design Principles

Theme the Experience (Forum shops) Harmonize Impressions with Positive Cues (Fort Lauderdale airport parking garage) Eliminate Negative Cues (Cinemark talking trash containers) Mix in Memorabilia (Hard Rock T-shirts) Engage all Five Senses (Mist in Rainforest)

Role of the Service Manager

Entrepreneurial Innovation Capitalizing on Social Trends Management Challenges Economies of Scale (MRI scanner) Economies of Scope(Convenience store) Complexity (Yield Management) Boundary Crossing (Bank vs Brokerage) International Competitiveness(Diversity)

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

Discussion Topics
Is it possible for an economy to be based entirely on services? Speculate on the effect that the Internet will have on the delivery of services. What is the value of self-service in an economy? What are the implications? Comment on the role that marketing plays in the service innovation process. Illustrate how the type of work he or she does influences a persons lifestyle.