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WARSAW SCHOOL OF ECONOMICS

DEPARTMENT OF MANAGEMENT THEORY

THE NATURE, DEFINITION & TYPES OF SERVICES


MIM 1 - Service Quality in the New Economy

Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

ARE SERVICES PRODUCTIVE? Productive is all labour which fixes and realises itself in a particular subject or vendible commodity...unproductive is all labour which generally perish in the very instant of their performance (Adam Smith, 1776) Services and other goods, which pass out of existence in the same instant that they come into it, are of course not part of the stock of wealth (A. Marshall, 1920)

MIM 1 - Service Quality in the New Economy

Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

ALTERNATIVE METHODS OF VALUE ADDED DELIVERY

Products delivery

Organisation

Production in company

Distribution

Consumption

Customer benefits

Service delivery
Based on: Davis, Frank W., Jr.
MIM 1 - Service Quality in the New Economy

Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

DRIVING FORCES BEHIND THE GROWHT OF SERVICES Relaxation of Professional Association Standards Privatisation Computerisation and technological/information innovation Growth of franchising and network companies Outsourcing, leasing and rental development Manufacturers as service providers Globalisation Income changes impact on buying behaviour Sociological and demographic changes
MIM 1 - Service Quality in the New Economy

Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

DEFINITION OF SERVICE
Combination of outcomes and experiences delivered to and received by customer. The Service Experience: direct experience and interaction with customer:
the extent of personalisation of the process the responsiveness of the service organisation the flexibility of customer-facing staff the ease of access to service personnel or information systems the extent to which the customer feels valued by organisation the courtesy and competence of customer-facing staff interactions with other customers.
(Johnston, Clark 2005)

The service outcome: The result of service delivery to customer So, services deal with processes rather than with things and are experienced rather than consumed.
MIM 1 - Service Quality in the New Economy

Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

DEFINITION OF SERVICE (2)

Service is defined as a social act which


takes place in direct contact between the customer and representatives of the service company.

1999 South-Western College Publishing MIM 1 - Service Quality in the New Economy

Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

DEFINITION OF SERVICE (3)


Services are actually all those economic activities in whcih the primary output is neither a product nor a construction
(Quinn, Gagnon)

Any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything.
(Kotler)

A service is and activity or series of activities of more or less intangible nature that normally, but not necessarily, take place in interactions between the customer and service employees and/or systems of the service provider, which are provided as solutions to customer problems.
(Grnroos)

All those economic activities that are intangible and imply interaction to be realised between service provider and consumer.
(Van Looy et al.)

MIM 1 - Service Quality in the New Economy

Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

SERVICE MANAGEMENT DEFINITIONS


SERVICE: Work done by one person or group for the benefit of another QUALITY: A measure of the extent to which a thing or experience meets a need, solves a problem, or adds value for someone SERVICE MANAGEMENT A total organizational approach that makes the quality of service, as perceived by the customer, the number one driving force for the operation of the business MOMENT OF TRUTH Any episode in which the customer comes into contact with some aspect of your organization and gets an impression of the quality of its service. (Albrrecht, Zemke, 2002)
MIM 1 - Service Quality in the New Economy

Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

DIMENSIONS OF SERVICE QUALITY


Performance Primary product characteristics Features Secondary characteristics, added features Conformance Meeting specifications, standards etc. Reliability Consistency of performance over time Durability Useful repair, includes repair Service Resolution of problems and complaints, ease of repair Response Human-to-human interface, courtesy Aesthetics Sensory characteristics Reputation Past performance and other intangibles

(Adapted from Garvin 1988 by Besterfield et al. 2003)

MIM 1 - Service Quality in the New Economy

Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

CHARACTERISTICS OF LEADING SERVICE COMPANY

Understands moments of truth Has well formulated service strategy (and concept) Has customer-friendly system Has customer-focused front-office staff

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Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

TYPES OF SERVICES (1) By branch (problematic today) Degree of Customer interaction Service characteristics (voluntary and involuntary) The role of service in company
External (for what customer pays) Internal (in-house services)

Degree of customisation (standard and customised) Degree of customer contact (high and low-contact) Facilities or field-based service Core and supplementary services The subject of service: person or object (towards people or equipment Degree of demand fluctuation over time
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Introduction to Services

MIM 1 - Service Quality in the New Economy

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

SERVICE MATRIX (1)


PLACE AND SUBJECT OF SERVICE

Subject of service
Person Object

Field-based Insurance Window replacement

Place of service
Facilities-based

Cash collection

Shoemaker

MIM 1 - Service Quality in the New Economy

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Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

LABOUR INTENSITY VS. INTERACTION AND CUSTOMISATION

SERVICE MATRIX (2)

Interaction/Customisation
Low SERVICE FACTORY Airlines Trucking Hotels Resorts and recreation MASS SERVICE Retailing Wholesaling Schools Retails banking High SERVICE SHOP Hospitals Auto repair Other repair services

Low

Labour intenstity

High

PROFESSIONAL SERVICE Doctors Lawyers Accountants Architects

(R. De Matta 1995) MIM 1 - Service Quality in the New Economy

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Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

CHALLENGE OF DEALING WITH LABOR INTENSITY

Low labour intensity


Capital decisions Technological Advances Managing demand Scheduling

High labour intensity


Hiring, training Labour benefits Workforce scheduling
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Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

CHALLENGE OF DEALING WITH INTERACTION AND CUSTOMISATION

Low interaction/Low customisation


Marketing Ambience Polices and procedures (fairly rigid)

High interaction/High customisation


Minimizing cost Maintaining quality Reacting to consumer intervention in the process
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Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

WHY TO CLASSIFY SERVICES?

Knowledge of service position Better formulation of strategies Better recognition of challenge for managers

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Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

THE SECRET OF SUCCESS

We are a concept company. Our vision is to contribute to a better everyday life for the majority of people. We do this by offering a wide range of home furnishing items of good design and function at prices so low that majority of people can afford to buy them
Ingvar Kamprad, Founder of IKEA

Accompanying concepts: self-selection, self-service, self-delivery, self-built.


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Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

WHAT IS THE SERVICE CONCEPT?

More emotional than a business model Deeper tha a brand More complex than a good idea More solid than a vision Can unite employees and customers Can create competitive advantage

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Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

SERVICE CONCEPT DEFINED


The service concept is a shared understanding of the nature of the service provided and received, which should encapsulate information about: The organising idea the essence of the service bought, or used, by the customer The service experience the customers direct experience of the service process (the way the service provider deals with cusotmer) The service outcome the result for the customer of the service The service operation - the way in which the service will be delivered The value of the service the benefit that customers perceive to be inherent in the service weighed against the cost of service.

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Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

SERVICE CONCEPT EXAMPLE: ALTON TOWERS


Organising idea: A great day out at a theme park Service concept (summary): A UK theme park that provides an inclusive package of over 100 rides and attractions to suit all ages and tastes, whith thrills, fun, fast food, historic heritage and magnificent gardens, Service experience: quick and easy to buy ticket exhilarating and entertaining fun and lively, for all ages range of attractions plenty of food and drinks long queues for main rides at peak Service operation: good signage to the park large car parks clear site maps different queueing systems range of food outlets Over 100 rides and attractions
MIM 1 - Service Quality in the New Economy

Service outcome: great day out fun time thrilling rides never a dull moment great experience with friends/family exhausting Service value: all-inclusive price car parking is extra expensive ticket but well worth it few additinal costs food reasonably priced overall excellent value for money 20
Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

THE SERVICE MANAGEMENT TRINITY


THE OPERATIONS CONCEPT

CUSTOMERS

THE MARKETING CONCEPT

THE HRM CONCEPT

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Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

UNDERSTANDING THE NATURE OF SERVICE ACT


What is the nature of service act? Tangible actions Who or what is the direct recipient of the service? People Possessions Services directed at peoples bodies: Passenger transport Health care Lodging Beauty salonsi Physicla therapy Fitness centers Restaurants/bars Haircutting Funeral services Services directed at peoples mind: Intangible actions Advertising/PR Arts and Entertainment Broadcasting/cable Management consulting Education Information services Music concerts Psychotherapy Religion Voice telephone Services directed at physical possessions: Freight transport Repair and maintenance Warehousing/storage Janitorial services Retail distributrion Laundry and dry cleaning Refueling Landscape/lawn care Disposal/Recycling Services directed at intangible assets: Accounting Banking Data processing Data transmission Insurance Legal services Programming Reserach Securities investment Software consulting

(Lovelock, 1994) MIM 1 - Service Quality in the New Economy

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Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

THE SERVICE MARKETING TASKS

Evaluate and select market segments Select service attributes Set prices Tailor location and timing of service availability Inform customers about the service and promote its use

MIM 1 - Service Quality in the New Economy

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Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

THE SERVICE OPERATIONS TASKS

Create and deliver the specified service package to target customers that meets quality and productivity

MIM 1 - Service Quality in the New Economy

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Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

THE HUMAN RESOURCE TASKS

Ensure the right number and mix of people at service company Design work systems (i.e. layout, information needs, technology requirements) to create services Develop reword systems Maximase employee welfare :
Working conditions Advancements Job security, etc.
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Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

TYPICAL INTERFUNCTIONAL CONFLICTS

Revenue vs. Cost Orientation Different Time Horizons Perceived Fit o New Product with Existing Operations.

MIM 1 - Service Quality in the New Economy

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Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

OPERATIONS VS. MARKETING PERSPECTIVES (1)


Operational Issues Improving productivity Operations goals Reduce unit cost of production Keeps costs low and quality constant; simplify operations tasks; recruit lowcost employees Marketing concerns Customers may feel service quality declines Customers may seek variety, prefer services tailored to their needs and delivered by knowledgeable employees. Customers may be forced to wait, feel one of a crowd be turned off by other people in the group. Service unavailable when needed; quality may be compromised during high-demand periods Operationally oriented employees with narrow roles may be unresponsive to customers

Standardization

Batch processing

Seek economies of scale, consistency, efficient use of capacity by processing customers in groups Keep costs down by avoiding wasteful underutilisation of resources

Capacity management

Job description

Minimize error, waster and fraud; use technology efficiently; simplify tasks and standardise work

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Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

OPERATIONS VS. MARKETING PERSPECTIVES (2)


Operational Issues Facilities location Operations goals Reduce costs; provide convenient access for suppliers and employees Control costs; improve efficiency by ensuring proximity of operationally related tasks; enhance safety and security. Marketing concerns Customers may find location unattractive and inconvenient Customers may see facility as ugly, layout as complicated and timewasting, and find equipment hard to use.

Facilities and equipment design

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Introduction to Services

WARSAW SCHOOL OF ECONOMICS


DEPARTMENT OF MANAGEMENT THEORY

SERVICE CONCEPT MODEL


Customer Value Operations & Technology Service Concept
Capacity Management Facilities & Location

Performance Measurement

Internationalisation

Process Design & Management

Service Strategy

Customer Information Relationships & Loyalty Technology Communication Customer & Promotion Satisfaction Pricing

Empowerment Job & Role Design

Collaboration

Competencies

Innovation
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Introduction to Services