Introduction to Service

Management

Dr Prashant Gupta
 What are Services?
 Services are deeds, processes, and
performances provided, coproduced, or co-
created by one entity or person for and/or
with another entity or person.
 Definition of Service

 Services are economic activities offered by one party

to another, most commonly employing time-based
performances to bring about desired results in
recipients themselves or in objects or other assets for
which purchasers have responsibility.
 Co-production

Co-production is when you as an individual

influence the support and services you receive,
or when groups of people get together to
influence the way that services are designed,
commissioned and delivered.
 Co-Creation
 58% of businesses are now piloting co-
creation projects to help drive innovation.
 This collaboration can be an excellent way to
discover new market opportunities, push
product / service branding in new directions,
or establish a presence in a completely new
area. However, 
co-creation isn’t always a walk in the park.
•Core
CoreServices
services / /functions
Functionsare
basic things that customers
want from the products they
purchase.

Customers want services to

be provided correctly,
customized to their needs,
delivered on time, and priced
competitively.
 Core Services Performance
Objectives
Quality

Operations
Flexibility Speed
Management

Price (or cost

Reduction)
 VALUE

 ‘Value to the customer means buying a

product / service with the most important
attributes at the lowest possible price’.

 To improve value we must :

 Either improve on the criteria that are most
important to the customer, or
 Reduce cost to the customer, or
 Do both.
 Creation of Value
•Meeting customer requirements •Customer/product support
•Fitness for use
•Product service
•Process integrity (minimum
•Flexibility to meet customer
variances)
•Elimination of waste
demands
•Flexibility to meet market changes
•Continuous improvement

Value = (Quality) * (Service)

(Cost) * (Cycle Time)

•Design & engineering •Time-to-market (concept to

•Conversion
•Quality assurance
delivery, order entry to delivery)
•Response to market forces
•Distribution
•Administration
lead time (design, conversion,
•Materials
engineering and delivery)
 OPERATIONS-A VALUE ADDING
PROCESSES
( Transformations
Operations add )
value to object thereby
enhancing its usefulness through :
 ALTERATION :
 Physical (Form / State): Manufacturing
 Sensual : Concerts, Cinema, Music
 Psychological : Psychiatrist, Counselors
 PHYSIOLOGICAL : Health Care
 EXCHANGE : Retailing
 INFORMATIONAL : Telecommunication
 LOCATIONAL : Transportation
 STORAGE : Warehousing e.g. Cold Storage
 INSPECTION : Inspection and Testing Agencies
 Input-Transformation-Output Relationships for
System
Typical Systems
Primary Resources Primary Typical
Inputs Transformatio Desired
n Function(s) Output
Hospital Patients Doctors, Nurses, Health Care Healthy
Medical Supplies, (Physiological) Individuals
Equipment
Restaurant Hungry Food, Cook, Well prepared, Satisfied
Customers Waiters, Well-served Customers
Environment Food; Agreeable
environment
(Physical and
Exchange)
Distribution Stock Storage Bins, Storage and Fast
Center Keeping Stock - pickers Redistribution Delivery,
Units Availability
(SKUs) of SKUs
 Input-Transformation-Output Relationships for
Typical systems
System Primary Resources Primary Typical
Inputs Transformation Desired
Function(s) Output
College or High School Teachers, Imparting Educated
University Graduates Books, knowledge and Individuals
Classrooms skills
(Informational)
Department Shoppers Displays, Attract Shoppers, Sales to
Store Stocks of Promote Products, Satisfied
Goods, Fill Orders Customers
Sales Clerks (Exchange)
Comparison of Systems to Produce Products
and Services
PRODUCTS SERVICES

Tangible Intangible

Inventoriable Non-inventoriable

Minimal contact with ultimate consumer High contact with clients or customers

Complex and inter-related processing Comparatively simple processing

Demand variable on weekly, monthly and Demand variable on hourly, daily and
seasonal basis weekly basis
Markets are normally regional, national and Markets are normally local
international
Larger units Smaller units

Location dependent upon location of Location dependent upon location of

regional,national, and international market local customers, clients and users
 Value-Added
Value-added Services
Services
differentiate the organization
from competitors and build
relationships that bind
customers to the firm in a
positive way.
 Value-Added Service
Categories
Problem Solving

Service
Information Sales Support
Management

Field Support
 Services: The New Profit / Cost
Imperative in Manufacturing

Category Total Expenditure

Personal Computers 5 Times the Product Cost

Locomotives 21 Times the Product Cost

Automobiles 5 Times the Product Cost

Source: Adopted from Howells (2004)

 Service Dimensions through Life Cycle
of a Product
Pre-purchase During Post-purchase
Activities Purchase Activities
Activities
Seeking Advice Financing Disposal

Consultation Leasing Recycling

Services
Purchase Information Repair and
Facilitation Sharing Maintenance
Delivery
Source: Adopted from Howells (2004)
Goods-Services Continuum
 Service Package
The service package is a bundle of goods and services with
information that is provided in some environment. The
bundle consists of:
 Supporting Facility: The physical resources that must
be in place before a service can be sold. Examples are
golf course, ski lift, hospital, airplane.
 Facilitating Goods: The material consumed by the
buyer or items provided by the consumer. Examples are
food items, legal documents, golf clubs, medical history.
 Information: Operations data or information that is
provided by the customer to enable efficient and
customized service. Examples are patient medical
records, seats available on a flight, customer
preferences, location of customer to dispatch a taxi.
 Service Package
(cont.)
 Explicit Services: Benefits readily observable by the
senses. The essential or intrinsic features. Examples
are quality of meal, attitude of the waiter, on-time
departure.
 Implicit Services: Psychological benefits or extrinsic
features which the consumer may sense only vaguely.
Examples are privacy of loan office, security of a well
lighted parking lot.
 Characteristics of Services
1. Intangibility
2. Inseparability
3. Variability (Heterogeneity)
4. Perishability
 1. Intangibility
 Service cannot be stored
 Service cannot be patented legally and hence can be easily
copied by competitors.
 Service cannot be readily displayed or easily communicated
to customers leading to difficulty in assessing the quality.
 Decisions regarding advertising and promotions are difficult.
 Pricing is difficult as it is hard to determine the actual cost of
a “unit of service” and price/quality relationship is complex.
 It is less efficient than goods production.
 Design of total service package is not possible.

For example: Services rendered by banks, restaurants,

airlines etc. An airline traveller cannot know the kind of experience he
is going to have during a flight at the time of making the purchase for
the first time.
 Tangibility Spectrum

Salt
 Soft Drinks

 Detergents
 Automobiles
 Cosmetics
Fast-food
 Outlets

 Intangible
Dominant

Tangible

Dominant Fast-food
Outlets 
Advertising
Agencies

Airlines 
Investment
Management 
Consulting 
Teaching
 2. Inseparability
 Centralized mass production is difficult, if not impossible.

 Customer experience depends upon action of employees

and interaction between employees and customers.

 Operations need to be decentralized so that service can

be delivered directly to consumers in convenient
locations.

 Due to simultaneous production and consumption, the

customer involvement is high and this may affect the
outcome of the service transaction.

 Involvement of customers in the production process.

 3. Variability/Heterogeneity

 Standardisation is difficult to achieve.

 Hard to set up a quality control.
 Quality can be determined only after the
service has been performed.
 Difficult to communicate what exactly the
customer is going to receive.
 4. Perishability
 Value is short lived.
 Cannot be inventoried
 Time pressure in sales
 Capacity is finite

For example: An airline seat on a particular flight, if

not sold cannot be stored for sale during the
next flight.
 Services are Different
Goods Services Resulting Implications
Tangible Intangible Services cannot be inventoried.
Services cannot be patented.
Services cannot be readily displayed or communicated.
Pricing is difficult.
Standardized Heterogeneous Service delivery and customer satisfaction depend on
employee actions.
Service quality depends on many uncontrollable factors.
There is no sure knowledge that the service delivered
matches what was planned and promoted.
Production Simultaneous Customers participate in and affect the transaction.
separate from production and Customers affect each other.
consumption consumption Employees affect the service outcome.
Decentralization may be essential.
Mass production is difficult.
Nonperishable Perishable It is difficult to synchronize supply and demand with
services.
Services cannot be returned or resold.

Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, “Problems and Strategies in Services Marketing,”
Journal of Marketing 49 (Spring 1985): 33-46.
 CLASSIFICATION OF
Nature of Service
Action
SERVICES(Possessions)
Services directed at people Services directed at Things

Tangible Actions PEOPLE’S BODIES : GOODS AND PHYSICAL

Health care POSSESSIONS :
Passenger transportation Freight transportation
Beauty salons Equipment Repair & Maintenance
Restaurants, Haircutting Janitorial Services
Laundry & Dry- Cleaning
Horticulture
Veterinary Care

Intangible Actions PEOPLE’S MINDS : INTANGIBLE ASSETS :

Education Banking
Broadcasting Legal services
Information services Accounting
Theatres Securities
Museums Insurance
 Productivity Improvement

 Productivity of resources , whether

manpower, capital or material, is key to a
company’s competitiveness.
 Productivity is not a matter of technique
only.To succeed, productivity initiatives
must be linked to a desire in the minds of
people to compete and win.
Factors Influencing Productivity at
Different
Economic
Levels
Environmental level

Organizational level

o gy Pro Individual level

n ol du cts
ech
T
Vision

Manage ues and

vision,
thods

styles
Social Skills Motivation
Work Me

val
me n t
Technological

Values
Wo
rk
cu l n
tu r
e ni zatio
a
Org stems
&Sy

Political