Service: The New Frontier

1. Service: The New Frontier Welcome to Service Management Professor Drew Rosen

2. Learning Objectives • Describe the central role of services in an economy. • To explore the differences between manufacturing and services. • Explore the role of services within manufacturing and manufacturing’s reliance on services. • Understanding service management/service operations • Describe and contrast the features of the new experience economy with that of previous economies.

3. Interactive Role of Services

4. Service Definitions A Service is a Time-perishable, Intangible Experience Performed for a Customer Acting in the Role of a Coproducer. James Fitzsimmons Services are deeds, processes, and performances. Valarie Zeithaml & Mary Jo Bitner

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

6. Stages of Economic Development Features Pre- Use of Standard dominant human Unit of of living Society Game activity labor social life measure Structure Technology Pre- Against Agriculture Raw Extended Sub- Routine Simple hand Industrial Nature Mining muscle household sistence Traditional tools power Authoritative Industrial Against Goods Machine Individual Quantity Bureaucratic Machines fabricated production tending of goods Hierarchical nature Post- Among Services Artistic Community Quality of Inter- Information industrial Persons Creative life in terms dependent Intellectual of health, Global education, recreation

7. The Service Revolution “There are no such things as service industries. There are only industries whose service components are greater or less then those of other industries. Everybody is in service”! Theodore Levitt

8. Global Employment, % Share

9. Percent Employment in Service Jobs, by Nation, 1980-2015

10. Growth In Employment Global Private Sector Services, 1980-2015, %

11. Services as % of GDP

12. Services Defined • Service Industry • Customer Service • Field Service

13. Why Services Are Important • Increased Competition • Manufacturing Support • Makes Economic Sense

14. “When the quality and price of competing products are similar or nearly identical, service activities can ‘differentiate’ undifferentiated products in the mind of the customer” Glaskowsky et al.

15. Relative Importance of Service Activities Consumer Goods Merchandising Industrial Goods Merchandising All Merchandising All Manufacturing All Other Manufacturing Electronics Mfg. Chemicals & Plastics Mfg. All Industries Relative Importance of Marketing Variables Paper Mfg. Food Mfg. Product Price Service Sales Effort TOTAL 36 23 23 18 100 38 24 20 18 100 38 26 18 18 100 36 27 15 22 100 29 26 24 21 100 38 25 22 15 100 48 14 22 16 100 28 17 39 16 100 30 22 27 21 100 31 23 23 23 100 National Council of Physical Distribution Management

16. Parallel Product/Service Design Product Delivery Product Concept Product Design Service Concept Service Design Service Delivery

17. The Supply Chain Suppliers Tier 2 Suppliers Tier 1 Retailers Distributors C U S T Manufacturing O Inbound Logistics Operations Outbound Logistics M E R S Information

18. Service Industries Communications, Transportation, Utilities, Health Care, Banking, etc. R & D Commercial Services User (Self-Service) Distribution Services Wholesaling Retailing Repairing Service Intermediary Consumer (Self-Service) Product Design Private Business Services Supporting Manufacturing, Accounting, Legal, Consulting, Software, Maintenance Government Support Services Waste Disposal Services, Road Maintenance, Education, Health Support, Standards, Police and Fire Protection, etc. Manufacturing Services Inside the Company--Design, Legal, Accounting Advertising, etc.

19. The Service Revolution “There are no such things as service industries. There are only industries whose service components are greater or less then those of other industries. Everybody is in service” Theodore Levitt

20. Service and Profitability • Reduced operating expenses • Competitive differentiation • Increased quality • Increased efficiency • Increased responsiveness • Increased market Share • Increased customer loyalty

21. Contributors to Market Share Market Share Due to Service Activities Market Share Market Share Due to Captive Markets Market Share Due to Product Features Time

22. Satisfaction and Loyalty apostle zone of affection 100% 80% zone of indifference 60% Loyalty (Retention) 40% zone of defection 20% terrorist 1 2 3 4 5 Dissatisfied Satisfied Very satisfied Neutral Very dissatisfied Satisfaction

23. The New Experience Economy

24. The Four Realms of an Experience

25. Experience Design Principles • Theme the Experience (Forum shops) • Harmonize Impressions with Positive Cues(Fort Lauderdale airport parking garage) • Eliminate Negative Cues(Cinemark talking trash containers) • Mix in Memorabilia (Hard Rock T-shirts) • Engage all Five Senses (Mist in Rainforest)

26. Role of the Service Manager • Entrepreneurial Innovation • Capitalizing on Social Trends • Management Challenges Economies of Scale (MRI scanner) Economies of Scope(Convenience store) Complexity (Yield Management) Boundary Crossing (Bank vs Brokerage) International Competitiveness(Diversity)

27. Profits are the result of attention to quality and customer satisfaction, while the reverse is rarely true. Edwards Deming

28. Discussion Topics • Is it possible for an economy to be based entirely on services? • Speculate on the effect that the Internet will have on the delivery of services. • What is the value of self-service in an economy? What are the implications? • Comment on the role that marketing plays in the service innovation process. • Illustrate how the type of work he or she does influences a persons lifestyle.