Service Industry
Week 1
Chapter 1: The nature of services.
Service =
- Kotler: any activity of benefit or transaction that one party can offer for sale that is
essentially intangible and does not result in the ownership of anything.
- Wirtz: economic activities performed by one party to another. Often time-based, these
performances bring about desired results, objects or other assets. In exchange for
money, time and effort, service customers expect value from access to labor, skills,
expertise, goods, facilities, networks and systems.
- Service management: all those economic activities that are intangible and imply an
interaction to be realized between service provider and consumer.
Industry division in sectors:
- Primary sector: farming, forestry, fishing.
- Secondary sector: industrial, including gas, mining and manufacturing, electricity, water
and construction.
- Tertiary sector: a synonym for the service sector.
Three levels of product:
1. Core customer value: the problem-solving services or benefits that costumer are really
buying when they obtain a product. Example, travel/transport.
2. Actual product: the physical good or delivered service that you get. Brand name,
mid/high quality level, packaging, design, features.
3. Augmented product: increases the value of the core service. E.g. inflight entertainment,
internet access. Product support, warranty, after-sale service, delivery and credit.
Categories of services:
- Distributive: transportation, communication, trade.
- Producer: investment banking, insurance engineering, accounting, bookkeeping, legal
services.
- Social: health care, education, non-profit organizations (church), government agencies
(police, military).
- Personal services: tourism, recreational, domestic services (dogwalkers, cleaning
maids).
Four characteristics of services:
- Intangibility: cannot be seen, tasted, felt, smelled before purchase. Try before you buy is
usually not possible in services. A service may or may not be attached to a physical
product.
1. Search qualities. Such as, color, price, smell.
2. Experience qualities. Such as, taste and wearability which can only be judged after
purchase.
3. Credence qualities. When you don’t have the skills to judge.
- Heterogeneity / Variability: it depends on the service provider, the customer, and the
surroundings. Related to the potential of variability in the performance of services.
- Simultaneity / Inseparability: services are consumed and used at the same time and it
cannot be separated from their providers.
- Perishability: services can’t be stored for later sale or use. Time is an important factor.
Divide the demand of when. E.g. early-bird tickets, off-season sales.
, Degree of intangibility
Difference between
physical goods and
services Service Industry I 6 november 2018
Physical goods Services
tangible intangible
homogeneous heterogeneous
Production and distribution are Production, distribution and
separated from consumption consumption are simultaneous
processes. Customers participate in
production
A physical object An activity or process
Can be kept in stock Cannot be kept in stock (perishable)
Source: Service management 3rd edition Gemmel, Van Looy, Van Dierdonck
Services: what makes them special?
Intangibility simply means that the result of a service transaction is not a transfer of ownership,
as in the case of physical goods. A service is a process or an act.
Simultaneity means that the realization of a service implies the presence of provider as well as
customer; both play anIndustry
Service active I role in the realization of services. 6 november 2018
Both intangibility and simultaneity imply further characteristics:
- Intangibility implies perishability
Service cannot be kept in stock like goods. It is not possible to produce services at one moment
in time, store them, and take them from the shelf to sell when appropriate, as it is with goods
- Simultaneity implies heterogeneity
The fact that both provider and customer need to interact at a certain point within the service
delivery process opens up possibilities of variation. Customers, service providers, the
surroundings, and even the moment of interaction are all sources of variation; consequently,
service delivery processes will tend to be characterized by increased heterogeneity
Difference between physical goods and services: put in table from pp.
- Consuming a service means undergoing the process and the final result.
- Consuming a physical product means making use of the product itself.
A service can be added to a physical product (= augmented)
Growing importance of the service industry:
- The service sector has been growing an annual rate 8% in recent year. In Europe, 70%
of GDP is produced by the service industry. Worldwide it is 60%.
- It dominates with the best jobs, incomes and talent.
, Driving forces of the service industry:
1. Increasing consumer incomes and sociological changes have led to a greater demand for
services.
2. Increasing professionalism in companies and technological changes have brought about the
creation of new services, notably of producer services.
- The impact of income changes on buying behavior. Engel’s law: as family income rises,
the percentage on food declines, the percentage on housing remains the same and the
percentage on other activities rises.
- Sociological and demographic changes. Singletons, working women, smaller families.
- The growing importance of producer services. These are the services used in the
production process of goods and services.
- Technological developments.
You can classify services based on their degree of; intangibility, customer contact required,
simultaneity, heterogeneity, perishability, demand of fluctuation over time, service
customization, labor intensity, and service direction towards people or equipment.
Service Industry
Maister’s Standardized Customized process
framework of process 2018-2019 / Q2 week 2
service (execution) (diagnosis)
classification
High degree of NURSE PHYCHOTHERAPIST
client contact Key skill: making client Key skill: real time
Value is rendered in experience comfortable diagnosis of complex, ill-
the ‘front room’, i.e. and user-friendly in specified problems
HOME
during WORK
interaction going through pre-set
with the client process
Low degree of PHARMACIST BRAIN SURGEON
client contact Key skill: supervision of Key skill: creative,
Read
Value chapterin 1 Service
is rendered low-cost Management
delivery team (p.3-15)
innovative solutions to one-
the Read chapter 8 Kotler (p. 237/238)
professional’s of-a-kind problems
back room. Client
Prepare
focus for training session 2 the following assignment individually or in pairs
is on result
only
See figure 1.3 of Service Management (page 18) below.
When simultaneity increases, there is greater
interaction between consumer and service
provider, leading to greater skill requirements.
Week 2
Service marketing
Select mix: 3 additional
a service provider with: P’s.
- High degree of intangibility/low degree of simultaneity
- High
Marketing mixdegree of intangibility/high
of a service degree of/ simultaneity
has 7 P’s. Product Place /
Low degree of intangibility/high degree of simultaneity
Price / -Promotion / Process / Physical evidence /
People.
For example:
- Bank
- Insurance company
- Hairdresser
- Beauty salon
- Holiday broker
- Airline
- Etc.
Week 1
Chapter 1: The nature of services.
Service =
- Kotler: any activity of benefit or transaction that one party can offer for sale that is
essentially intangible and does not result in the ownership of anything.
- Wirtz: economic activities performed by one party to another. Often time-based, these
performances bring about desired results, objects or other assets. In exchange for
money, time and effort, service customers expect value from access to labor, skills,
expertise, goods, facilities, networks and systems.
- Service management: all those economic activities that are intangible and imply an
interaction to be realized between service provider and consumer.
Industry division in sectors:
- Primary sector: farming, forestry, fishing.
- Secondary sector: industrial, including gas, mining and manufacturing, electricity, water
and construction.
- Tertiary sector: a synonym for the service sector.
Three levels of product:
1. Core customer value: the problem-solving services or benefits that costumer are really
buying when they obtain a product. Example, travel/transport.
2. Actual product: the physical good or delivered service that you get. Brand name,
mid/high quality level, packaging, design, features.
3. Augmented product: increases the value of the core service. E.g. inflight entertainment,
internet access. Product support, warranty, after-sale service, delivery and credit.
Categories of services:
- Distributive: transportation, communication, trade.
- Producer: investment banking, insurance engineering, accounting, bookkeeping, legal
services.
- Social: health care, education, non-profit organizations (church), government agencies
(police, military).
- Personal services: tourism, recreational, domestic services (dogwalkers, cleaning
maids).
Four characteristics of services:
- Intangibility: cannot be seen, tasted, felt, smelled before purchase. Try before you buy is
usually not possible in services. A service may or may not be attached to a physical
product.
1. Search qualities. Such as, color, price, smell.
2. Experience qualities. Such as, taste and wearability which can only be judged after
purchase.
3. Credence qualities. When you don’t have the skills to judge.
- Heterogeneity / Variability: it depends on the service provider, the customer, and the
surroundings. Related to the potential of variability in the performance of services.
- Simultaneity / Inseparability: services are consumed and used at the same time and it
cannot be separated from their providers.
- Perishability: services can’t be stored for later sale or use. Time is an important factor.
Divide the demand of when. E.g. early-bird tickets, off-season sales.
, Degree of intangibility
Difference between
physical goods and
services Service Industry I 6 november 2018
Physical goods Services
tangible intangible
homogeneous heterogeneous
Production and distribution are Production, distribution and
separated from consumption consumption are simultaneous
processes. Customers participate in
production
A physical object An activity or process
Can be kept in stock Cannot be kept in stock (perishable)
Source: Service management 3rd edition Gemmel, Van Looy, Van Dierdonck
Services: what makes them special?
Intangibility simply means that the result of a service transaction is not a transfer of ownership,
as in the case of physical goods. A service is a process or an act.
Simultaneity means that the realization of a service implies the presence of provider as well as
customer; both play anIndustry
Service active I role in the realization of services. 6 november 2018
Both intangibility and simultaneity imply further characteristics:
- Intangibility implies perishability
Service cannot be kept in stock like goods. It is not possible to produce services at one moment
in time, store them, and take them from the shelf to sell when appropriate, as it is with goods
- Simultaneity implies heterogeneity
The fact that both provider and customer need to interact at a certain point within the service
delivery process opens up possibilities of variation. Customers, service providers, the
surroundings, and even the moment of interaction are all sources of variation; consequently,
service delivery processes will tend to be characterized by increased heterogeneity
Difference between physical goods and services: put in table from pp.
- Consuming a service means undergoing the process and the final result.
- Consuming a physical product means making use of the product itself.
A service can be added to a physical product (= augmented)
Growing importance of the service industry:
- The service sector has been growing an annual rate 8% in recent year. In Europe, 70%
of GDP is produced by the service industry. Worldwide it is 60%.
- It dominates with the best jobs, incomes and talent.
, Driving forces of the service industry:
1. Increasing consumer incomes and sociological changes have led to a greater demand for
services.
2. Increasing professionalism in companies and technological changes have brought about the
creation of new services, notably of producer services.
- The impact of income changes on buying behavior. Engel’s law: as family income rises,
the percentage on food declines, the percentage on housing remains the same and the
percentage on other activities rises.
- Sociological and demographic changes. Singletons, working women, smaller families.
- The growing importance of producer services. These are the services used in the
production process of goods and services.
- Technological developments.
You can classify services based on their degree of; intangibility, customer contact required,
simultaneity, heterogeneity, perishability, demand of fluctuation over time, service
customization, labor intensity, and service direction towards people or equipment.
Service Industry
Maister’s Standardized Customized process
framework of process 2018-2019 / Q2 week 2
service (execution) (diagnosis)
classification
High degree of NURSE PHYCHOTHERAPIST
client contact Key skill: making client Key skill: real time
Value is rendered in experience comfortable diagnosis of complex, ill-
the ‘front room’, i.e. and user-friendly in specified problems
HOME
during WORK
interaction going through pre-set
with the client process
Low degree of PHARMACIST BRAIN SURGEON
client contact Key skill: supervision of Key skill: creative,
Read
Value chapterin 1 Service
is rendered low-cost Management
delivery team (p.3-15)
innovative solutions to one-
the Read chapter 8 Kotler (p. 237/238)
professional’s of-a-kind problems
back room. Client
Prepare
focus for training session 2 the following assignment individually or in pairs
is on result
only
See figure 1.3 of Service Management (page 18) below.
When simultaneity increases, there is greater
interaction between consumer and service
provider, leading to greater skill requirements.
Week 2
Service marketing
Select mix: 3 additional
a service provider with: P’s.
- High degree of intangibility/low degree of simultaneity
- High
Marketing mixdegree of intangibility/high
of a service degree of/ simultaneity
has 7 P’s. Product Place /
Low degree of intangibility/high degree of simultaneity
Price / -Promotion / Process / Physical evidence /
People.
For example:
- Bank
- Insurance company
- Hairdresser
- Beauty salon
- Holiday broker
- Airline
- Etc.
