2. WHAT IS A SERVICE?
The Distinction is Unclear:
The Scale of Market Entities
&
The Molecular Model
3. WHAT IS A SERVICE?
In General:
Goods Objects, Devices, Things
Services
Deeds, Efforts, Performances
4. THE BENEFIT CONCEPT
Encapsulation of benefits in the
consumers mind
Tide
Cleanliness
Whiteness
Motherhood
5. THE BENEFIT CONCEPT
Services deliver the bundle of
benefits through the experience
that is created for the consumer
The servuction model provides a
framework for understanding the
consumer’s experience
6. The Servuction Model
Inanimate Customer A
Environment
Invisible
organization Contact
and systems Personnel
Or
Service Customer B
Provider
Invisible Visible
Bundle of service
benefits received
by Customer A
7. THE INCREASING DEMAND
FOR SERVICE KNOWLEDGE
Changes in management perspective
The Industrial Model vs. The Market-
focused Model
Growth in service sector employment
Service sector contributions to the
world economy
Deregulation
8. THE DEMAND FOR KNOWLDEGE:
SERVICE SECTOR EMPLOYMENT
Service Sector New Job Creation:
Employment: 80% of All New
78% in United Jobs (1980-1990)
States 90% of All New
73% in Great Jobs (1990-2000)
Britain 88% of All Jobs by
62% in Japan 2005
57% in Germany
90% of All Jobs by
2020
*42% of Work Force is Providing Some Form of Personal Service
9. THE DEMAND FOR KNOWLEDGE:
CONTRIBUTIONS TO THE ECONOMY
Economic impact:
The service sector accounts for over
70% of the United States’ gross
domestic product (GDP)
The majority of industries in the U.S.
economy do not produce, they
perform
10. THE DEMAND FOR KNOWLEDGE:
THE IMPACT OF DEREGULATION
Effect of Deregulations:
No demand for services knowledge
when demand exceeded supply and
competitive pressures were few
Between 1980-1992
U.S. airlines declined from 36 to 12
the number of trucking companies that failed
during the 1980s was more than the previous
45 years combined
commercial banks declined by 14%
11. THE DEMAND FOR KNOWLEDGE:
THE IMPACT OF DEREGULATION
Effect of Deregulations (continued):
Knowledge is needed in nonprice issues:
customer service
customer retention
image enhancement
transforming public contact personnel
into marketing-oriented personnel
12. THE INDUSTRIAL MODEL
Sales Revenues are a function of:
location Strategies
sales Promotions
advertising
13. THE INDUSTRIAL MODEL
(continued)
Labor and operating costs should
be kept as low as possible
better to rely on machines than
humans
narrowly defined jobs
Leave little room for discretion
believes most employees are
indifferent, unskilled, and incapable of
completing complex tasks.
performance expectations are low
wages are kept low
few opportunities for advancement
14. THE INDUSTRIAL MODEL
(continued)
Places a higher value on upper and
middle managers
Replaces full-time personnel with
part-time personnel to reduce costs
15. CONSEQUENCES OF
THE INDUSTRIAL MODEL
(employee)
Guarantees a cycle-of-failure
Encourages front-line personnel to be
indifferent to problems
no opportunity for advancement (dead-
end jobs)
poor pay
some companies let employees go before
mandatory raises
16. CONSEQUENCES OF
THE INDUSTRIAL MODEL
(employee)
poor pay has created a new class of
migrant worker
16 million people now travel from one
short-term job to another
superficial training
focuses only on product knowledge
little, if any, company benefits
Prohibits employees from taking
discretionary action
High employee turnover rate
17. CONSEQUENCES
OF THE INDUSTRIAL MODEL
(customers)
Customer dissatisfaction
2/3 of customer’s defect, not due to the
product, but due to the unhelpfulness of
the provider
flat and declining sales revenues
Overall the industrial approach is bad
for:
employees
customers
shareholders
country
18. THE MARKET-FOCUSED
MANAGEMENT MODEL
Purpose of the firm is to serve the
customer
Service delivery is the focus of the
system and the overall differential
advantage in terms of competitive
advantage
The services triangle provides a
framework for the services model
19. THE SERVICES TRIANGLE
The
•The company service •The organization
exists to serve strategy exists to serve the
the customer needs of the people
who serve the
customer
The
customer
The The
systems people
20. THE SERVICES TRIANGLE
1. Communicate the service strategy to the
customer
2. Customer/employee interaction:
greatest opportunity for gains and
losses
moments-of-truth
critical incidents
3. Customer/procedures & physical
hardware
A.T.M. machines
cramped airline seats
21. THE SERVICES TRIANGLE
4. Organizational systems may
prevent
employees from giving good service
5. Physical and administrative systems
should flow logically from the
service
strategy
6. Good service starts at the top
*MGT. should “Walk What They Talk” and provide:
-sense of focus
-clarity
-priorities
22. CHARACTERISTICS OF THE
MARKET-FOCUSED MODEL
Believes employees want to do good
work
invests in people as much as machines
technology is used to assist people (not
to monitor there every activity)
data is made available to the front-line
23. CHARACTERISTICS OF THE
MARKET-FOCUSED MODEL
(continued)
Recognizes that employee turnover
and customer satisfaction are closely
related
tie pay to performance
focus on selection and training of
personnel
Ryder Truck
no training (41% turnover)
received training (19% turnover)
better trained, provide better
service, require less supervision
24. CHARACTERISTICS OF THE
MARKET-FOCUSED MODEL
(continued)
Employ more full-time employees
better for customers and employees
companies that pay more are finding
that as a percentage of sales, labor costs
are actually lower than industry averages
