The Nature of Services
After completing this chapter, you should be able to:
Explain what is meant by a service-product bundle.
Identify and critique the five distinctive characteristics of a service operation and explain the implications for managers.
Explain how services can be described as customers renting resources.
Describe a service using the five dimensions of the service package.
Use the service process matrix to classify a service.
Explain how a strategic classification of services can be helpful to managers.
Explain the role of a service manager from an open-systems view of service operations.
In this chapter, we explore the distinctive features of services. The service environment is sufficiently unique to allow us to question the direct application of traditional manufacturing-based techniques to services without some modification, although many approaches are analogous. Ignoring the differences between manufacturing and service requirements will lead to failure, but more importantly, recognition of the special features of services will provide insights for enlightened and innovative management. Advances in service management cannot occur without an appreciation of the service delivery process that creates the experience for the customer.
The distinction between a product and a service is difficult to make, because the purchase of a product is accompanied by some facilitating service (e.g., installation) and the purchase of a service often includes facilitating goods (e.g., food at a restaurant). Each purchase includes a bundle of goods and services as shown in Table 2.1. Our examples each have a principal focus or core activity that is either a product (i.e., business suits) or service (i.e., room for the night). However, peripheral goods and services augment the bundle offered to the customer. Finally, a variant often is used to differentiate the bundle from that of competitors.1
Core Goods Example
Core Service Example
Deferred payment plans
Room for the night
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Part One Understanding Services
We begin the chapter by answering the question Why study services? with a discussion of the distinctive characteristics of service operations. The non-ownership nature of services is illustrated with implications for management. The question What is a service? can be answered with the service package, explicit and implicit benefits performed within a supporting facility using facilitating goods and information. Services from diverse industries can be grouped into categories that share similar operations challenges when the delivery process is defined by degree of customization and degree of labor intensiveness. Finally, services are classified into five categories to obtain strategic insights.
Based on these observations, the role of the service manager is viewed from an opensystem perspective. That is, the service manager must deal with an environment in which the customers are present in the delivery system. This contrasts with manufacturing operations that are isolated or “buffered” from the customer by an inventory of finished goods. Thus, manufacturing traditionally has operated as a cost center, focusing on process efficiency. Service managers, who often operate as profit centers, must be concerned with both efficient and effective delivery of services.
Distinctive Characteristics of Service Operations
In services, a distinction must be made between inputs and resources. For services, inputs are the customers themselves, and resources are the facilitating goods,...
Bibliography: no. 4 (May 2004), pp. 324–35.
no. 1 (August 2004), pp. 20–41.
no. 2 (Summer 2006), pp. 329–42.
1. Based on “Customer Benefit Package” found in David A. Collier, The Service/Quality Solution,
(Burr Ridge, Ill: Irwin, 1994), pp
Institute for Defense Analysis, 1970).
4. E. H. Blum, Urban Fire Protection: Studies of the New York City Fire Department, R-681 (New
York: New York City Rand Institute, 1971).
5. G. M. Hostage, “Quality Control in a Service Business,” Harvard Business Review 53, no. 4
(July–August 1975), pp
6. From Christopher Lovelock and Evert Gummesson, “Whither Services Marketing? In Search of
a New Paradigm and Fresh Perspectives,” Journal of Service Research 7, no.1 (August 2004),
7. Adapted from Christopher H. Lovelock, “Classifying Services to Gain Strategic Marketing
Insights,” Journal of Marketing 47 (Summer 1983), p
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