Service: The New Frontier

Welcome to
Service Management
Professor Drew Rosen

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
Unit of
social life
Extended
household

Standard
of living
measure
Subsistence

Industrial Against Goods

fabricated production
nature

Machine Individual
tending

Quantity
of goods

PostAmong
industrial Persons

Artistic Community Quality of

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

Society Game
PreAgainst
Industrial Nature

PreUse of
dominant
human
activity
labor
Agriculture Raw
Mining
muscle
power

Services

Structure
Technology
Routine
Simple hand
Traditional tools
Authoritative
Bureaucratic Machines
Hierarchical

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, 1980-2015

Growth In Employment
Global Private Sector Services, 1980-2015

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.

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
10
0

48
14
22
16
100

29
26
24
21
100

38
25
22
15
100

30
22
27
21
100

31
23
23
23
100

Industrial Goods
Merchandising

Consumer Goods
Merchandising

All Merchandising

All Other
Manufacturing

Paper Mfg.

Electronics Mfg.

Food Mfg.

Chemicals &
Plastics Mfg.

All Manufacturing

Relative Importance
of Marketing Variables

All
Industries

Relative Importance of
Service Activities

28
17
39
16
100

National Council of Physical

Distribution Management

Parallel Product/Service Design

Produc
t
Conce
pt
Service
Concept

Product
Design

Service
Design

Product
Deliver
y

Service
Delivery

The Supply Chain

Suppliers
Tier 2

Suppliers
Tier 1

Distributors

Manufacturing
Inbound Logistics
Operations
Outbound Logistics

Information

Retailers

C
U
S
T
O
M
E
R
S

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

R&D
Manufacturin
g
Services Inside the
Company--Design,
Legal, Accounting
Advertising, etc.

Distribution
Services
Wholesaling
Retailing
Repairing

Service
Intermediary

Product
Design

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.

Commercial
Services User
(Self-Service)

Consumer
(Self-Service)

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

Loyalty (Retention)

Satisfaction and Loyalty

apostle
zone of affection

100%
80%

zone of indifference

60
%
40%

zone of defection

20%

terrorist

Dissatisfied Neutral Satisfied Very

Very
satisfied
dissatisfied

Satisfaction

The New Experience Economy

Economy

Agrarian

Industrial

Service

Experience

Function

Extract

Make

Deliver

Stage

Nature

Fungible

Tangible

Intangible

Memorable

Attribute

Natural

Standardized Customized Personal

Method of
supply

Stored in
bulk

Inventoried

Seller

Trader

Manufacturer Provider

Stager

Buyer

Market

User

Guest

Delivered
on demand

Client

Revealed
over time

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.