Role of Services in an EconomyRole of Services in an Economy

What is a service?What is a service?

An idea?An idea? A circumstance?A circumstance? A convenience?A convenience? A physical thing?A physical thing?

Goods vs. ServicesGoods vs. Services

Good: tangible physical object; created and Good: tangible physical object; created and transfered; existence over timetransfered; existence over time

Service: intangible and perishable; created Service: intangible and perishable; created and used simultaneously; only the effect has and used simultaneously; only the effect has an existence over timean existence over time

» Book, restaurant, TVBook, restaurant, TV

Challenge to managersChallenge to managers

Identify appropriate techniques developed Identify appropriate techniques developed in manufacturing that are applicable to in manufacturing that are applicable to service operationsservice operations

Initiate the innovative use of information Initiate the innovative use of information systemssystems

Recognise the consumer as a productive Recognise the consumer as a productive resourceresource

Service DefinitionService Definition

A Service is a Time-perishable, Intangible A Service is a Time-perishable, Intangible Experience Performed for a Customer Experience Performed for a Customer Acting in the Role of a Coproducer.Acting in the Role of a Coproducer.

James FitzsimmonsJames Fitzsimmons

Definition of Service FirmsDefinition of Service Firms

Service Enterprises are Organizations that Service Enterprises are Organizations that Facilitate the Production and Distribution of Facilitate the Production and Distribution of Goods, Support Other Firms in Meeting Goods, Support Other Firms in Meeting Their Goals, and Their Goals, and Add ValueAdd Value to Our Personal to Our Personal Lives.Lives.

James James FitzsimmonsFitzsimmons

Taxonomy of servicesTaxonomy of services

Domestic servicesDomestic services Trade and CommerceTrade and Commerce Services that refine and extend human Services that refine and extend human

capacitiescapacities

Role of Services in an EconomyRole of Services in an Economy

INFRASTRUCTURE SERVICE· Communications· Transportation· Utilities· Banking

PERSONAL SERVICES· Healthcare· Restaurants· Hotels

CONSUMER(Self-service)

GOVERNMENT SERVICES· Military· Education· Judicial· Police and fire protection

DISTRIBUTION SERVICES

· Wholesaling · Retailing · Repairing

FINANCIAL SERVICES · Financing · Leasing · Insurance

MANUFACTURINGServices inside company:

· Finance· Accounting· Legal· R&D and design

BUSINESS SERVICES· Consulting· Auditing· Advertising· Waste disposal

1-8

Stages of Economic Stages of Economic DevelopmentDevelopment

FeaturesFeatures

Pre- Use of StandardPre- Use of Standard

dominant human Unit of of living dominant human Unit of of living

Society Game activity labor social life measure Structure TechnologySociety Game activity labor social life measure Structure Technology

Pre- Against Agriculture Raw Extended Sub- Routine Simple handPre- Against Agriculture Raw Extended Sub- Routine Simple hand

Industrial Nature Mining muscle household sistence Traditional toolsIndustrial Nature Mining muscle household sistence Traditional tools

power Authoritative power Authoritative

Industrial Against Goods Machine Individual Quantity Bureaucratic Machines Industrial Against Goods Machine Individual Quantity Bureaucratic Machines

fabricated production tending of goods Hierarchical fabricated production tending of goods Hierarchical

naturenature

Post- Among Services Artistic Community Quality of Inter- InformationPost- Among Services Artistic Community Quality of Inter- Information

industrial Persons Creative life in terms dependentindustrial Persons Creative life in terms dependent

Intellectual of health, GlobalIntellectual of health, Global

education,education,

recreation recreation

The New Experience EconomyThe New Experience Economy

Economy Agrarian Industrial Service Experience

Function Extract Make Deliver Stage

Nature Fungible Tangible Intangible Memorable

Attribute Natural Standardized Customized Personal

Method ofsupply

Stored inbulk

Inventoried Deliveredon demand

Revealedover time

Seller Trader Manufacturer Provider Stager

Buyer Market User Client Guest

The Four Realms of an ExperienceThe Four Realms of an Experience

Customer Participation

Passive Active

EnvironmentalAbsorption Entertainment

(Movie)Education(Language)

Relationship Immersion Esthetic(Tourist)

Escapist(Skydiving)

Experience Design PrinciplesExperience Design Principles

Theme the Experience (Theme the Experience (Big ChefsBig Chefs)) Harmonize Impressions with Positive CuesHarmonize Impressions with Positive Cues Eliminate Negative CuesEliminate Negative Cues

(Cinemark talking trash containers)(Cinemark talking trash containers) Mix in Memorabilia (Hard Rock T-shirts)Mix in Memorabilia (Hard Rock T-shirts) Engage all Five Senses (Mist in Rainforest)Engage all Five Senses (Mist in Rainforest)

1-12

Source of Service Sector GrowthSource of Service Sector Growth

Information TechnologyInformation Technology (e.g. Internet) (e.g. Internet) InnovationInnovation

Push theory (e.g. Post-it) Push theory (e.g. Post-it) Pull theory Pull theory Services derived from products Services derived from products

Exploiting information (e.g. Auto part sales)Exploiting information (e.g. Auto part sales) Difficulty of testing service prototypesDifficulty of testing service prototypes Changing DemographicsChanging Demographics

Aging of the population Aging of the population Two-income families Two-income families UrbanisationUrbanisation

1-13

Role of the Service ManagerRole of the Service Manager

Entrepreneurial InnovationEntrepreneurial Innovation Capitalizing on Social TrendsCapitalizing on Social Trends Management ChallengesManagement Challenges

Economies of Scale (MRI scanner)Economies of Scale (MRI scanner)Economies of Scope(Convenience store)Economies of Scope(Convenience store)Complexity (Yield Management)Complexity (Yield Management)Boundary Crossing (Bank vs Brokerage)Boundary Crossing (Bank vs Brokerage)International Competitiveness(International Competitiveness( Cultural Cultural

Diversity) Diversity)

Discussion TopicsDiscussion Topics

Illustrate how the type of work he or she does Illustrate how the type of work he or she does influences a person’s lifestyle.influences a person’s lifestyle.

Is it possible for an economy to be based entirely Is it possible for an economy to be based entirely on services?on services?

Speculate on the effect that the Internet will have Speculate on the effect that the Internet will have on the delivery of services.on the delivery of services.

What is the value of self-service in an economy?What is the value of self-service in an economy? Comment on the role that marketing plays in the Comment on the role that marketing plays in the

service innovation process.service innovation process.